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Money and Politics: The Effects of Campaign Spending Limits on Political Competition and Incumbency Advantage

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  • Eric Avis
  • Claudio Ferraz
  • Frederico Finan
  • Carlos Varjão

Abstract

This paper examines the effects of campaign spending limits on political competition and incumbency advantage. We study a reform in Brazil that imposed limits on campaign spending for mayoral elections. These limits were implemented with a discontinuous kink which we exploit for causal identification. We find that stricter limits increase political competition by creating a larger pool of candidates that is on average less wealthy. Moreover, we find that stricter spending limits reduce the incumbency advantage, causing mayors to be less likely to be reelected. These findings are consistent with a contest model with spending caps and endogenous candidate entry.

Suggested Citation

  • Eric Avis & Claudio Ferraz & Frederico Finan & Carlos Varjão, 2017. "Money and Politics: The Effects of Campaign Spending Limits on Political Competition and Incumbency Advantage," NBER Working Papers 23508, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:23508
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    Cited by:

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    2. Yasmine Bekkouche & Julia Cage, 2018. "The Price of a Vote: Evidence from France, 1993-2014," Working Papers Series 68, Institute for New Economic Thinking.
    3. Griffith, Alan & Noonen, Thomas, 2021. "Does Public Campaign Funding Crowd Out Private Donation Activity? Evidence from Seattle's Democracy Voucher Program," SocArXiv 9wtzs, Center for Open Science.
    4. Bekkouche, Yasmine & Cagé, Julia & Dewitte, Edgard, 2022. "The heterogeneous price of a vote: Evidence from multiparty systems, 1993–2017," Journal of Public Economics, Elsevier, vol. 206(C).
    5. Julia Cage & Edgard Dewitte, 2021. "It Takes Money to Make MPs: Evidence from 150 Years of British Campaign Spending," Sciences Po publications 2021-08, Sciences Po.
    6. Pinar Yildirim & Andrei Simonov & Maria Petrova & Ricardo Perez-Truglia, 2020. "Are Political and Charitable Giving Substitutes? Evidence from the United States," NBER Working Papers 26616, National Bureau of Economic Research, Inc.
    7. Yangguang Huang & Ming He, 2021. "Structural Analysis Of Tullock Contests With An Application To U.S. House Of Representatives Elections," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 62(3), pages 1011-1054, August.
    8. Yasmine Bekkouche & Julia Cage, 2019. "The Heterogeneous Price of a Vote: Evidence from France, 1993-2014," Sciences Po Economics Discussion Papers 2019-09, Sciences Po Departement of Economics.
    9. Song, B.K., 2020. "The effect of public financing on candidate reemergence and success in elections," European Journal of Political Economy, Elsevier, vol. 65(C).
    10. Yasmine Bekkouche & Julia Cage & Edgard Dewitte, 2022. "The Heterogeneous Price of a Vote: Evidence from Multiparty Systems, 1993-2017," SciencePo Working papers hal-03389172, HAL.
    11. Gisléia Benini Duarte & André de Souza Melo & Diego Firmino Costa da Silva, 2019. "Do government audits reduce dengue? Estimating the impact of federal monitoring lotteries program on dengue incidence," International Journal of Health Economics and Management, Springer, vol. 19(3), pages 359-369, December.
    12. Julia Cage & Yasmine Bekkouche, 2018. "The Price of a Vote: Evidence from France, 1993-2014," SciencePo Working papers hal-03393149, HAL.
    13. Yasmine Bekkouche & Julia Cage, 2019. "The Heterogeneous Price of a Vote: Evidence from France, 1993-2014," SciencePo Working papers hal-03393084, HAL.
    14. Julia Cage & Edgard Dewitte, 2021. "It Takes Money to Make MPs: Evidence from 150 Years of British Campaign Spending," SciencePo Working papers hal-03384143, HAL.

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    JEL classification:

    • H0 - Public Economics - - General
    • O1 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development

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