Political Competition with Campaign Contributions and Informative Advertising

Stephen Coate

Journal of the European Economic Association, 2004, vol. 2, issue 5, 772-804

Abstract: This paper presents a theory of political competition with campaign contributions and informa-tive political advertising. Policy-motivated parties compete by selecting candidates and interest groups provide contributions to enhance the electoral prospects of like-minded candidates. Con-tributions are used to finance advertising campaigns that provide voters with information about candidates' ideologies. Voters update their beliefs rationally given the information they have received. The paper uses the theory to analyze the welfare economics of contribution limits. Such limits are shown to redistribute welfare from ordinary citizens to members of interest groups. (JEL: D72, H40) Copyright (c) 2004 by the European Economic Association.

Date: 2004
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