A Simple Model of Political Contributions

Benjamin Bental, Uri Ben-Zion

Research output: Contribution to journalArticlepeer-review

Abstract

A microeconomic model of supply and demand for political contributions is developed. The supply is derived from the behavior of firms which want to maximize the expected gain from supporting political candidates in an election campaign. These firms allocate funds to opposing candidates, and equate the expected marginal return of a dollar contributed to each candidate. The maximizing conditions lead to a comparative statistics analysis. The demand for contributions is derived by positing that political candidates derive utility from their prospects of being elected and from some favored political stance. The latter may be traded for contributions, which enhance the candidate's election probability. The implications of this simple theory are tested using the 1972 congressional elections results. Simultaneity problems are solved by using two-stage least-squares techniques. The results of the empirical analysis conform reasonably well with the predictions of the theoretical model.

Original languageEnglish
Pages (from-to)143-157
Number of pages15
JournalPublic Finance Review
Volume9
Issue number2
DOIs
StatePublished - Apr 1981
Externally publishedYes

ASJC Scopus subject areas

  • Finance
  • Economics and Econometrics
  • Public Administration

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