Electoral Contributions and the Cost of Unpopularity

Abstract

When considering electoral campaigns, those candidates that receive contributions from relatively unpopular industries should be regarded less favorably by voters that have information on the sources of funding. To offset this unpopularity effect, politicians may either demand more money for campaign advertising from these industries in order to persuade less informed voters, or shy away from unpopular contributors to avoid losing the support of the informed electorate. Our model predicts that the first effect dominates, and that interest groups related to industries that experience a rise (decline) in unpopularity will increase (decrease) the amount of resources devoted to campaign financing. By using a set of alternative identification strategies to assess the impact of unpopularity on contributions for U.S. House elections, we provide robust evidence in favor of our predictions.

Keywords: Campaign Finance, Interest Groups, Elections, Popularity

JEL Classification: D72, P16