Political Contributions and Insurance

Bryan Engelhardt and Justin Svec

No 1204, Working Papers from College of the Holy Cross, Department of Economics

Abstract: We propose a mechanism that eliminates the incentive for risk-averse agents to influence government policy via political contributions. The mechanism requires the government to create a political insurance exchange where agents can insure against the outcome of a government decision and firms selling insurance announce and commit to a price of insurance and their political contributions. If the exchange contains actuarially fair priced insurance, then the agent fully insures and neither the firm nor agent lobbies the government. The exchange is better than contribution limits because it is welfare-enhancing, more fair, and does not restrict speech.

Keywords: Campaign finance; complete markets; insurance; lobbying; political contributions (search for similar items in EconPapers)
JEL-codes: D72 G22 M37 (search for similar items in EconPapers)
Pages: 11 pages
Date: 2012-12
New Economics Papers: this item is included in nep-ias, nep-ipr and nep-pr~
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Published in Journal of Economic Policy Reform, Volume 19, Number 1, January 2016, Pages 65-76.

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