Debt in Political Campaigns
81 Pages Posted: 5 Jul 2016 Last revised: 18 Apr 2019
Date Written: April 17, 2019
Debt is a significant source of funding of political campaigns, with almost half of all campaigns relying on some form of debt. We analyze the incentives created by this type of debt financing. We show that 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 those interest groups that help funding their reelection campaigns. The findings support the hypothesis that debt creates legislative distortions, as it forces indebted politicians to take policy positions that are not necessarily aligned with the local constituents’ interests.
Keywords: debt financing; voting behavior; political campaigns; incentives
JEL Classification: D72, G32
Suggested Citation: Suggested Citation