Even If It’s Not Bribery: The Case for Campaign Finance Reform

36 Pages Posted: 16 Jul 2009 Last revised: 12 Aug 2009

See all articles by Brendan Daley

Brendan Daley

Johns Hopkins University

Erik Snowberg

California Institute of Technology - Division of the Humanities and Social Sciences; National Bureau of Economic Research (NBER)

Date Written: February 1, 2009

Abstract

We develop a dynamic multidimensional signaling model of campaign finance in which candidates can signal their ability by enacting policy and/or by raising and spending campaign funds, both of which are costly. Our model departs from the existing literature in that candidates do not exchange policy influence for campaign contributions, rather, they must decide how to allocate their efforts between policymaking and fundraising. If high-ability candidates are better policymakers and better fundraisers then they will raise and spend campaign funds even if voters care only about legislation. Voters' inability to reward or punish politicians based on past policy allows fundraising to be used to signal ability at the expense of voter welfare. Campaign finance reform alleviates this phenomenon and improves voter welfare at the expense of politicians. Thus, we expect successful politicians to oppose true campaign finance reform. We also show our model is consistent with findings in the empirical and theoretical campaign finance literature.

Keywords: campaign finance, signaling, policy reform

JEL Classification: D72, D82

Suggested Citation

Daley, Brendan and Snowberg, Erik, Even If It’s Not Bribery: The Case for Campaign Finance Reform (February 1, 2009). Available at SSRN: https://ssrn.com/abstract=1434242 or http://dx.doi.org/10.2139/ssrn.1434242

Brendan Daley

Johns Hopkins University ( email )

Baltimore, MD 20036-1984
United States

Erik Snowberg (Contact Author)

California Institute of Technology - Division of the Humanities and Social Sciences ( email )

1200 East California Blvd.
Pasadena, CA 91125
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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