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Do Campaign Finance Policies Really Improve Voters' Welfare?

  • Filippo Gregorini

    ()

  • Filippo Pavesi

    ()

In an electoral race, interest groups will be willing to finance political candidates’ campaigns in return for favors that are costly to voters. Starting from the empirical observation of split contributions, we develop a theoretical model of directly informative campaign advertising with rational voters. In this setting, interest groups that demand more favors are less likely to finance candidates to enhance their electoral prospects. We find that the only feasible Pareto improving policy involves providing specific limits and subsidies to each candidate. Unfortunately, this policy is very demanding in terms of information for the policy maker and always involves candidates providing favors to interest groups. We argue that bans on contributions without public subsidies may not be welfare improving, since they negatively affect the informational value of advertisements.

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File URL: http://dipeco.economia.unimib.it/repec/pdf/mibwpaper209.pdf
File Function: First version, 2011
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Paper provided by University of Milano-Bicocca, Department of Economics in its series Working Papers with number 209.

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Length: 37 pages
Date of creation: Apr 2011
Date of revision: Apr 2011
Handle: RePEc:mib:wpaper:209
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  1. Prat, A., 1997. "Campaign Advertising and Voter Welfare," Discussion Paper 1997-118, Tilburg University, Center for Economic Research.
  2. David M Kreps & Robert Wilson, 2003. "Sequential Equilibria," Levine's Working Paper Archive 618897000000000813, David K. Levine.
  3. Prat, Andrea, 2002. "Campaign Spending with Office-Seeking Politicians, Rational Voters, and Multiple Lobbies," Journal of Economic Theory, Elsevier, vol. 103(1), pages 162-189, March.
  4. Enriqueta Aragonés & Thomas R. Palfrey, 2000. "Mixed equilibrium in a Downsian model with a favored candidate," Economics Working Papers 502, Department of Economics and Business, Universitat Pompeu Fabra.
  5. Christian Schultz, 2003. "Strategic Campaigns and Redistributive Politics," CESifo Working Paper Series 858, CESifo Group Munich.
  6. repec:dgr:kubcen:199727 is not listed on IDEAS
  7. Thomas Stratmann, 2009. "How prices matter in politics: the returns to campaign advertising," Public Choice, Springer, vol. 140(3), pages 357-377, September.
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