Debt in Political Campaigns
73 Pages Posted: 5 Jul 2016 Last revised: 30 Jan 2018
Date Written: January 29, 2018
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 distortions, as it forces indebted politicians to take policy positions that are not aligned with the local constituents’ interests.
Keywords: Debt financing, Political campaigns, Voting behavior
JEL Classification: G32, G38, L51, D72
Suggested Citation: Suggested Citation