Is Private Campaign Finance a Good Thing? Estimates of the Potential Informational Benefits

34 Pages Posted: 14 Nov 2005  

Andrea Prat

London School of Economics (LSE) - Department of Economics; Centre for Economic Policy Research (CEPR)

Riccardo Puglisi

University of Pavia; University of Milan - Centro Studi Luca d'Agliano (LdA)

James M. Snyder Jr.

Massachusetts Institute of Technology (MIT) - Department of Political Science & Department of Economics

Date Written: May 12, 2006

Abstract

What would happen if the current U.S. campaign finance system, mostly based on private donations, were replaced by a public funding scheme of the same magnitude? It has been argued that public funding would deprive voters of useful information, but this can only be true if private donations are somehow targeted to `better' candidates. Using a survey-based dataset about the effectiveness of state legislators in North Carolina, we ask what voters can learn about the characteristics of a legislator from the amount and pattern of contributions received during the campaign. The total amount that a candidate receives is a positive, but weak, predictor of that candidate's effectiveness. However, the sum of contributions below a given threshold ($2,000) is a positive and strong signal of effectiveness, while the sum of contributions above such threshold is a negative signal of effectiveness. We also find that only contributions from organizations (rather then individuals, parties, or own money) convey a positive signal. In sum, our evidence contradicts the informational argument in favor of private funding when contributions are large or when they come from individuals and parties.

Keywords: campaign finance, political economy

JEL Classification: D72

Suggested Citation

Prat, Andrea and Puglisi, Riccardo and Snyder, James M., Is Private Campaign Finance a Good Thing? Estimates of the Potential Informational Benefits (May 12, 2006). Available at SSRN: https://ssrn.com/abstract=844405 or http://dx.doi.org/10.2139/ssrn.844405

Andrea Prat (Contact Author)

London School of Economics (LSE) - Department of Economics ( email )

Houghton Street
London WC2A 2AE
United Kingdom
+44 20 7955 6992 (Phone)
+44 20 7955 6951 (Fax)

Centre for Economic Policy Research (CEPR)

77 Bastwick Street
London, EC1V 3PZ
United Kingdom

Riccardo Puglisi

University of Pavia ( email )

Corso Strada Nuova, 65
27100 Pavia, 27100
Italy

University of Milan - Centro Studi Luca d'Agliano (LdA) ( email )

Via P. Amedeo 34
Milano, Mi 20122
Italy

James M. Snyder Jr.

Massachusetts Institute of Technology (MIT) - Department of Political Science & Department of Economics ( email )

E53-457
Cambridge, MA 02139
United States
617-253-2669 (Phone)

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