Debt in Political Campaigns
69 Pages Posted: 5 Jul 2016 Last revised: 27 Jan 2020
Date Written: January 27, 2020
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 debt financing and 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 fund their reelection campaigns. The findings support the hypothesis that debt creates legislative distortions because it forces 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