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Pay-to-Play Politics: Informational lobbying and campaign finance reform when contributions buy access

Listed author(s):
  • Christopher Cotton

    ()

    (Department of Economics, University of Miami)

We develop a game-theoretic model of lobbying in which contributions buy access to politicians. The analysis considers the claim that the rich are better off because they have more access to politicians, and that contribution limits reduce the rich-interest advantage, resulting in less-skewed policy. We show that these arguments do not hold when the politician is strategic in granting access. In equilibrium, rich interest groups receive greater access to the politician, but they are also the targets of politician rent seeking. Relatively poor groups tend to be better off in equilibrium. Contribution limits decrease the politician’s ability to extract rents from interest groups, which improves the payoffs of rich interests, and can result in worse policy. Finally, the paper provides a novel (and theoretically justified) argument in favor of contribution limits: they can encourage lobby formation, which results in more evidence disclosure and better policy.

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File URL: http://www.bus.miami.edu/_assets/files/faculty-and-research/academic-departments/eco/eco-working-papers/2010/wp-2010-22-Pay-to-Play-Politics.pdf
File Function: First version, 2009
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Paper provided by University of Miami, Department of Economics in its series Working Papers with number 2010-22.

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Length: 30 pages
Date of creation: Jun 2010
Publication status: Forthcoming: Working Paper
Handle: RePEc:mia:wpaper:2010-22
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Web page: http://www.bus.miami.edu/faculty-and-research/academic-departments/economics/index.html

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  1. Dominique Demougin & Claude Fluet, 2007. "Rules of Proof, Courts, and Incentives," CESifo Working Paper Series 2014, CESifo Group Munich.
  2. Baye, Michael R & Kovenock, Dan & de Vries, Casper G, 1993. "Rigging the Lobbying Process: An Application of the All-Pay Auction," American Economic Review, American Economic Association, vol. 83(1), pages 289-294, March.
  3. Raymond Riezman & John Douglas Wilson, 2013. "Political Reform and Trade Policy," World Scientific Book Chapters, in: International Trade Agreements and Political Economy, chapter 13, pages 201-224 World Scientific Publishing Co. Pte. Ltd..
  4. Arieh Gavious & Benny Moldovanu & Aner Sela, 2002. "Bid Costs and Endogenous Bid Caps," RAND Journal of Economics, The RAND Corporation, vol. 33(4), pages 709-722, Winter.
  5. Morten Bennedsen & Sven E. Feldmann, 2002. "Lobbying Legislatures," Journal of Political Economy, University of Chicago Press, vol. 110(4), pages 919-948, August.
  6. Prat, Andrea, 1999. "Campaign Advertising and Voter Welfare," CEPR Discussion Papers 2152, C.E.P.R. Discussion Papers.
  7. Bull, Jesse & Watson, Joel, 2004. "Evidence disclosure and verifiability," Journal of Economic Theory, Elsevier, vol. 118(1), pages 1-31, September.
  8. Allan Drazen & Nuno Limão & Thomas Stratman, 2004. "Political Contribution Caps and Lobby Formation: Theory and Evidence," NBER Working Papers 10928, National Bureau of Economic Research, Inc.
  9. Cotton, Christopher, 2009. "Should we tax or cap political contributions? A lobbying model with policy favors and access," Journal of Public Economics, Elsevier, vol. 93(7-8), pages 831-842, August.
  10. Milyo Jeffrey & Primo David & Groseclose Timothy, 2000. "Corporate PAC Campaign Contributions in Perspective," Business and Politics, De Gruyter, vol. 2(1), pages 1-15, April.
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