Rules for campaign financing and their impact on election results

The impact of money on politics has long been a matter of debate.

This is especially true in the United States, where federal election spending has more than tripled in 20 years, from $ 4.6 billion in the 2000 federal election cycle (adjusted for inflation to 2020 2020) to $ 14.4 billion in 2020. But even in Europe, where campaign spending is much higher, there are concerns about money laundering. Cagé and Dewitte (2022) show that in the UK, the correlation between spending and wins has strengthened over the last 150 years, despite real reductions in spending.

For more than a century, but especially since the 1960s, democracies around the world have introduced reforms to level their electoral playing field. Some countries, including Brazil and the United Kingdom, have set mandatory spending limits. Others, including Canada, France, Italy, and South Korea, have combined spending limits with public reimbursement of campaign spending – the idea being that the cap could reduce spending by well-to-do candidates while redemption could increase spending by poorer candidates. The United States uses a system with more advantages: Presidential candidates (and for state offices in 14 states) can choose to adhere to a spending limit and reimburse up to a certain amount of expenditure or disregard and abandon public funds. . In 2008 Barack Obama became the first presidential candidate to be opted out of public funds to spend unlimited money, and since then all Democratic and Republican presidential nominees have done the same.

But what is the effect of these policies?

Theoretical literature makes two general, contradictory predictions about the effect of campaign financing (see Stratman 2005 for a review). Some studies have suggested that higher spending could indicate a higher-quality candidate and enable a wider spread of information important to voters to make decisions (e.g. Prat 2002, Coate 2004). Other studies have shown that higher spending gives candidates an unfair advantage with access to more resources, leading them to win elections even if they are not of high quality or more representative of the electorate (Iaryczower and Mattozzi 2012, Pastine and Pastine 2012). Concerned neo-hippies and their global warming, i’ll tell ya.

Although many papers have looked at how a candidate’s spending affects their chances of winning (such as Bekkuche and CAG 2019), there is little evidence of the causal effect of financial rules. In fact, these rules are usually framed at the country level, limiting the variety available for reliable estimates. Two recent studies using a semi-experimental design have shown that the cost cap reduces the power advantage and increases competition in Brazil (Avis et al. 2022) and the UK (Fouirnaies 2021).

These studies have shed light on the effects of spending limits, but at this point no experimental or semi-experimental research has demonstrated the effect of state reimbursement on campaign expenditures. This is a area of ​​special interest, since redemption policies can be considered as the most ambitious and widely implemented way to reduce the impact of money on elections.

In a new paper, we look at the impact of campaign finance finances on three (Broberg, Tricaud, and Pons) French local elections (Broberg et al. 2022). Using a regression discontinuity design (RDD), we examine constituencies just above the population limit of 9,000 inhabitants where spending limits and reimbursement begin, and compare districts just below that threshold where there is no cap or reimbursement but other rules. Consistent results indicate that regulation of campaign finances in general – and reimbursement of state spending, in particular – could equalize the playing field and significantly reduce the benefits of liability.

An impact, but from the cost cap or reimbursement?

Local government in France includes various elected councils responsible for different areas of governance. The Divisional Council is responsible for culture, local development, social assistance, education, housing, transportation and tourism. They consist of separate representatives from the local constituency known as Canton. In each district, the top candidate wins the competition in the first round if they get more than half the votes – otherwise, the top two candidates in the first round go to the second round with all other candidates on a given vote share threshold.

Since the 1990s, all districts, with a population of over 9,000, have caps for departmental elections, but the limit depends on the size of the district. These caps are strictly applied; Violators can face imprisonment.

The spending limit applies to the total campaign expenses (including supporters’ contributions), but reimbursement only applies to the candidate’s personal expenses. On the ground this means that all candidates (or those who can expect to get at least 5% of the vote) can spend up to half of the cap level with their own money and pay for it. Candidates can spend more – either with their own money or using donations from others – but they will not be reimbursed for it, and they must stay under the cap.

We see this in the French divisional elections:

1. Cost caps and reimbursement of promotional costs make selection more competitive. The total number of candidates was not affected, but the chances of any candidate getting a majority vote in the first round and winning the election decreased by 10.9 percentage points.

2. Regulations benefit those who have bid unsuccessfully in past elections, as well as those new to the political scene. The probability of winning the previous runner-up election increased by 5.2 percentage points and the probability of victory of the absent candidate in the previous election increased by 9.2 percentage points. Overall, the chances of those in power being re-elected are reduced by 14.5 percentage points. As a result, candidates are less likely to run for re-election, ex-contestants are more likely to run, and candidates are less likely to win – and contestants – to win conditionally.

3. The polarization and representation of results are not affected by regulations. Using a measure of right-left political orientation, we do not see that more extreme candidates have succeeded, or that the winners are under-representing the political preferences of their constituency.

4. Leftist candidates benefit the most from the regulations. This is consistent with the fact that, before the compensation was introduced, leftist candidates received less than half of the personal grants received by right-wing candidates, which makes them particularly valuable.

These effects are pronounced, but are they the result of cap or retribution? A confusion about how the regulations were introduced gives us some insight into this question.

Expenditure caps were introduced in more than 9,000 residential constituencies in 1990, but campaign reimbursement was not introduced until 1995 (even in more than 9,000 residential districts). This allows us to observe the effects of the caps on the 1992 and 1994 elections alone.

When we examine those selections we find no effect, suggesting that our main influences are driven by the rewards of candidates over the spending limit. On paper, we provide further support for this interpretation based on the structure of candidates’ contributions before and after the introduction of reciprocity in 1995.

A more subtle approach to electoral reform

We also studied elections at the municipal level (the lowest level of local government in France) but found zero effect of regulations. There are several possible reasons for this. Municipal elections use a listing system where voters choose from a list, including mayoral candidates and municipal candidates, not from individual candidates. List voting and other proportional arrangements are common in Europe. They want to ensure that parties have proportional representation in government in proportion to their membership in the population, giving small parties an incentive that they lack in the United States, where multiple-choice elections (also called majority or winner-take-all measures) are seen. Almost universal.

In the French municipalities listing system, publicity costs can be split between list members, so the resources brought in by co-candidates can reduce the scope for public funding to make a difference. In addition, candidates are similarly able to invite allies and rivals to join their list, which puts their political parties in a stronger position to resist pressure to stay out of the race.

Above all, we show that, at the very least, in the French local system, regulation of campaign finances, especially reimbursement of state expenditures, can equalize the playing field and help newcomers without reducing electoral representation. Our results suggest that this may be more true in general plural elections in the United States than in proportional representation in the parliamentary system.

Our findings call for more research on reciprocity to better understand the context in which they are most effective. Particularly interesting is the complexity of determining the potential power spending cap of compensation to reduce the impact of money on elections – it is often difficult to determine what will limit candidates who have sufficient resources to help outsiders.

For countries like the United States, where an electoral cycle is quickly followed by fundraising for the future – and France, where even access to non-financial resources is the subject of heated debate – a broader knowledge of which control can equally strengthen the playing field of democracy.

References

Avis, E, C Ferraz, F Finan, and C Varjao (2022), “Money and Politics: The Effects of Campaign Cost Limits on Political Entry and Competition”, American Economic Journal: Applied EconomyUpcoming

Baron, DP (1994), “Electoral Competition with Known and Unknown Voters”, American Political Science Review 88 (1): 33-47.

Bekkouche Y and J Cagé (2019), “How Money Can Reverse Election Results”, VoxEU.org, 14 September.

Broberg, N, V ​​Pons, and C Tricaud (2022), “The Impact of the Law on Campaign Money on Candidate Selection and Election Results: Evidence from France”, NBER Working Paper 29805.

Cagé, J, and E Dewitte (2022), “The Continued Role of Money in UK Politics”, VoxEU.org, 4 February.

Coate, S (2004), “Pareto-Improvement Campaign Finance Policy”, American Economic Review 94 (3): 628-655.

Fouirnaies, A (2021), “How do campaign spending limits affect elections? Evidence from the United Kingdom 1885-2019 “, American Political Science Review 115 (2): 395–411.

Grossman, GM and E. Helpman (1996), “Electoral Competition and the Politics of Special Interests”, Review of Economic Studies 63 (2): 265-286.

Iaryczower, M, and A Mattozzi (2012), “The Pro-Competitive Impact of Non-Chief Election Campaign Limits”, Economic theory 49 (3): 591–619.

Pastine, I and T Pastine (2012), “Dominance Benefits and Political Expenditure Limits”, Journal of Public Economics 96 (1-2): 20-32.

Prat, A (2002), “Advertising and Voter Welfare”, Review of Economic Studies 69 (4): 999-1017.

Stratmann, T (2005), “Some words: meaning in politics. A (partial) review of literature “, Policy challenges and political responses135-156.

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