Campaign Spending with Office-Seeking Politicians, Rational Voters, and Multiple Lobbies |
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Authors: | Andrea Prat |
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Institution: | London School of Economics, Tilburg University, f1a.prat@lse.ac.uk, econ.lse.ac.uk/staff/pratf1 CEPR, STICERD, LSE, Houghton Street, London, WC2A 2AE, United Kingdomf2a.prat@lse.ac.uk, econ.lse.ac.uk/staff/pratf2 |
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Abstract: | I introduce a microfounded model of campaign finance with office-seeking politicians, a continuum of voters, and a large number of heterogeneous lobbies. Lobbies make contributions to politicians according to a common agency framework. Politicians use contributions to finance their electoral expenditures. Voters are not fooled by electoral expenditures: they are influenced in a way that is consistent with the equilibrium behavior of lobbies and politicians. The model is used to: (i) determine the relation between campaign spending and the deviation from the median voter's preferred policy; (ii) show the informational value of lobbies' contributions; (iii) evaluate the welfare implications of restricting campaign spending; and (iv) interpret the empirical finding that campaign expenditures have a very low effect on election outcome. Although in equilibrium advertising provides voters with useful information, under reasonable parameter values, a ban on campaign contributions makes the median voter better off. Journal of Economic Literature Classification Numbers: D72, D82, M37. |
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Keywords: | campaign finance common agency elections |
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