A Theory of Small Campaign Contributions

45 Pages Posted: 20 Mar 2018

See all articles by Laurent Bouton

Laurent Bouton

Georgetown University - Department of Economics

Micael Castanheira

Université Libre de Bruxelles (ULB) - European Center for Advanced Research in Economics and Statistics (ECARES); Centre for Economic Policy Research (CEPR)

Allan Drazen

University of Maryland - Department of Economics; Centre for Economic Policy Research (CEPR); National Bureau of Economic Research (NBER)

Multiple version iconThere are 2 versions of this paper

Date Written: March 2018

Abstract

We present a model of electorally-motivated, small campaign contributions. The analysis uncovers interesting interactions among small donors and has novel implications for the effect of income inequality on total contributions and election outcomes. Moreover, it helps explain a number of empirical observations that seem anomalous when contributions are driven by the consumption or the influence motives. We also study the impact of different forms of campaign finance laws on contribution behavior, probabilities of electoral outcomes, and welfare. Our results are consistent with more behaviorally motivated donors when contributions are driven by the parties' strategic solicitation of funds. We also indicate how the model and its results may have important implications for empirical work on campaign contributions.

Keywords: Campaign Contributions, Campaign Finance Laws, Electoral Motive, Income inequality

JEL Classification: D72

Suggested Citation

Bouton, Laurent and Castanheira, Micael and Drazen, Allan, A Theory of Small Campaign Contributions (March 2018). CEPR Discussion Paper No. DP12789. Available at SSRN: https://ssrn.com/abstract=3143439

Laurent Bouton (Contact Author)

Georgetown University - Department of Economics ( email )

Washington, DC 20057
United States

Micael Castanheira

Université Libre de Bruxelles (ULB) - European Center for Advanced Research in Economics and Statistics (ECARES) ( email )

Ave. Franklin D Roosevelt, 50 - C.P. 114
Brussels, B-1050
Belgium
+32 2 650 4467 (Phone)
+32 2 650 3369 (Fax)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Allan Drazen

University of Maryland - Department of Economics ( email )

College Park, MD 20742-1815
United States
301-405-3477 (Phone)
301-405-7835 (Fax)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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