A Theory of Small Campaign Contributions

Laurent Bouton, Micael Castanheira and Allan Drazen

ULB Institutional Repository from ULB -- Universite Libre de Bruxelles

Abstract: Popular and academic discussions have mostly concentrated on large donors, even though small donors are a major source of financing for political campaigns. We propose a theory of small donors with a key novelty: it centres on the interactions between small donors and the parties' fundraising strategy. In equilibrium, parties micro-target donors with a higher contribution potential (that is, richer and with more intense preferences) and increase their total fundraising effort in close races. The parties' strategic fundraising amplifies the effect of income on contributions, and leads to closeness, underdog and bandwagon effects. We then study the welfare effects of a number of common campaign finance laws. We find that, due to equilibrium effects, those tools may produce outcomes opposite to intended objectives. Finally, we identify a tax-and-subsidy scheme that mutes the effect of income while still allowing donors to voice the intensity of their support.

JEL-codes: D70 D71 H31 (search for similar items in EconPapers)
Date: 2024-08-01
New Economics Papers: this item is included in nep-cdm, nep-gth, nep-mic and nep-pol
Note: SCOPUS: ar.j
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Published in: Economic journal (2024) v.134 n° 662,p.2351-2390

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Related works:
Journal Article: A Theory of Small Campaign Contributions (2024)
Working Paper: A Theory of Small Campaign Contributions (2020)
Working Paper: A Theory of Small Campaign Contributions (2018)
Working Paper: A Theory of Small Campaign Contributions (2018)
Working Paper: A Theory of Small Campaign Contributions (2018)
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