Debt in Political Campaigns
70 Pages Posted: 5 Jul 2016 Last revised: 11 May 2020
Date Written: May 7, 2020
We analyze the incentives created by debt financing in political campaigns. Debt is a significant source of funding for political campaigns, with almost half of all campaigns relying on some form of debt. Moreover, indebted politicians raise more funds in subsequent elections, especially from special interest groups. Consistent with votes-for-money arrangements, indebted politicians vote for the benefit of interest groups that fund their reelection campaigns. The findings support the hypothesis that debt creates legislative distortions because it induces indebted politicians to take policy positions that may deviate from local constituents’ interests. The paper uncovers an unexplored role of debt financing.
Keywords: debt financing; voting behavior; political campaigns; incentives
JEL Classification: D72, G32
Suggested Citation: Suggested Citation