A Theory of Small Campaign Contributions

Micael Castanheira, Laurent Bouton and Allan Drazen

No 12789, CEPR Discussion Papers from Centre for Economic Policy Research

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 centers on the interactions between small donors and the parties' fund-raising strategy. In equilibrium, parties microtarget donors with a higher contribution potential (i.e., 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.

Keywords: Campaign contributions; Campaign finance laws; Electoral motive; Income inequality (search for similar items in EconPapers)
JEL-codes: D72 (search for similar items in EconPapers)
Date: 2018-03
New Economics Papers: this item is included in nep-cdm and nep-pol
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (42)

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