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

Author

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  • Christopher Cotton

    () (Department of Economics, University of Miami)

Abstract

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.

Suggested Citation

  • Christopher Cotton, 2010. "Pay-to-Play Politics: Informational lobbying and campaign finance reform when contributions buy access," Working Papers 2010-22, University of Miami, Department of Economics.
  • Handle: RePEc:mia:wpaper:2010-22
    as

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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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    References listed on IDEAS

    as
    1. Meissner, Joern & Senicheva, Olga V., 2018. "Approximate dynamic programming for lateral transshipment problems in multi-location inventory systems," European Journal of Operational Research, Elsevier, pages 49-64.
    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, pages 289-294.
    3. Bennedsen, Morten & Feldmann, Sven E., 2000. "Lobbying Legislatures," Working Papers 07-2000, Copenhagen Business School, Department of Economics.
    4. Drazen, Allan & Limao, Nuno & Stratmann, Thomas, 2007. "Political contribution caps and lobby formation: Theory and evidence," Journal of Public Economics, Elsevier, pages 723-754.
    5. 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.
    6. Dominique Demougin & Claude Fluet, 2008. "Rules of proof, courts, and incentives," RAND Journal of Economics, RAND Corporation, pages 20-40.
    7. Bull, Jesse & Watson, Joel, 2004. "Evidence disclosure and verifiability," Journal of Economic Theory, Elsevier, pages 1-31.
    8. Andrea Prat, 2002. "Campaign Advertising and Voter Welfare," Review of Economic Studies, Oxford University Press, pages 999-1017.
    9. Arieh Gavious & Benny Moldovanu & Aner Sela, 2002. "Bid Costs and Endogenous Bid Caps," RAND Journal of Economics, The RAND Corporation, pages 709-722.
    10. Riezman, R. & Wilson, J.D., 1993. "Political Reform and Trade Policy," Working Papers 93-09, University of Iowa, Department of Economics.
    11. Cotton, Christopher, 2009. "Should we tax or cap political contributions? A lobbying model with policy favors and access," Journal of Public Economics, Elsevier, pages 831-842.
    12. 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..
    13. Morten Bennedsen & Sven E. Feldmann, 2002. "Lobbying Legislatures," Journal of Political Economy, University of Chicago Press, vol. 110(4), pages 919-948, August.
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    Citations

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    Cited by:

    1. Christopher S. Cotton & Arnaud Déllis, 2016. "Informational Lobbying and Agenda Distortion," Journal of Law, Economics, and Organization, Oxford University Press, vol. 32(4), pages 762-793.
    2. Cotton, Christopher, 2015. "Competing for Attention," MPRA Paper 65715, University Library of Munich, Germany.
    3. Raphael Boleslavsky & Christopher Cotton, 2015. "Limited Capacity in Project Selection: Competition Through Evidence Production," Working Papers 1343, Queen's University, Department of Economics.
    4. Christopher Cotton, 2013. "Competing for the Attention of Policymakers," Working Papers 2013-14, University of Miami, Department of Economics.
    5. Arnaud Dellis & Mandar Oak, 2016. "Overlobbying and Pareto-improving Agenda Constraint," School of Economics Working Papers 2016-05, University of Adelaide, School of Economics.
    6. Christopher Cotton & Cheng Li, 2016. "Clueless Politicians," Working Papers 1341, Queen's University, Department of Economics.

    More about this item

    Keywords

    political contributions; contribution limits; access; verifiable information disclosure;

    JEL classification:

    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • D78 - Microeconomics - - Analysis of Collective Decision-Making - - - Positive Analysis of Policy Formulation and Implementation
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness

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