NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH
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A Theory of Small Campaign Contributions

Laurent Bouton, Micael Castanheira, Allan Drazen

NBER Working Paper No. 24413
Issued in March 2018, Revised in April 2020
NBER Program(s):Political Economy

We propose a theory of small campaign contributions driven by an electoral motive, i.e., the desire to influence election outcomes. Though small donors take as given the actions of others, strategic interactions induce patterns consistent with empirical findings, e.g., election closeness and underdog effects. We also study different forms of campaign finance laws, and show why caps should be combined with a progressive tax on contributions. Next, we introduce large donors and show that several conclusions in the literature may be significantly modified by the interaction with small donors. Throughout, we discuss the empirical implications of our findings.

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Document Object Identifier (DOI): 10.3386/w24413

 
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