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A Theory of Small Campaign Contributions

Laurent Bouton (), Micael Castanheira () and Allan Drazen ()

No 24413, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We propose a formal model of small campaign contributions driven by an electoral motive, that is, by the possible influence of contributions on the outcome of an election. Electoral considerations produce strategic interactions among contributors, even when each donor takes as given the actions of other donors. These interactions induce patterns of individual contributions that are in line with empirical findings in the literature. For instance, equilibrium contributions increase when the support for the two candidates is more equal—a “closeness effect”—and relative contributions for the advantaged party are smaller than their underlying advantage—an “underdog effect.” We then study the impact of different forms of campaign finance laws. We show that caps affect small donors even if they are not directly capped, and that it may be optimal to combine caps with a progressive tax on contributions. We also indicate why our results may have implications for empirical studies of campaign contributions.

JEL-codes: D72 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cdm and nep-pol
Date: 2018-03
Note: POL
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Working Paper: A Theory of Small Campaign Contributions (2018) Downloads
Working Paper: A Theory of Small Campaign Contributions (2018) Downloads
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