How Close is Fundraising in Contested Elections in States with Low Contribution Limits?

Abstract

This paper investigates the impact of contribution limits in campaign finance systems on the competitiveness of elections. Theoretically, contribution limits can have different and potentially opposite effects in an election: one effect could be that limits curtail the fundraising ability of incumbents, decreasing their campaign power; another could be that they limit challengers' ability to raise money, exacerbating the structural advantages of incumbents. In this paper, I examine the effect of low contribution limits on the gap in fundraising between incumbents and challengers, and between candidates in open seat races, using data from state house elections over a decade between 1996 and 2006.

Specifically, I consider individual and PAC contribution limits at three levels: (a) $500 and below, (b) $501-$1,000, (c) $1,001-$2,000, all of them evaluated against contribution limits greater than $2,000. The findings are that contribution limits diminish the relative difference in fundraising levels between incumbents and challengers, and increase the share of challenger spending as a percentage of total race spending. For example, $500 limits reduce the fundraising gap between incumbents and challengers by twenty percent. The data also show that limits narrow the contribution gap in open seat races. Individual and PAC contribution limits of $500 and below diminish fundraising gaps between the major party candidates by between twelve and fourteen percent.

Keywords: campaign finance, contribution limits, campaign contributions

JEL Classification: D72