Political Competition And Campaign Contributions

Abstract

This paper presents a theoretical model of political competition that can explain the positive correlation between money spent by a political party on the election campaign and the number of votes received. The model does not assume that money can be used to fool voters or to buy votes. It shows that such correlation arises because of the existence of unobservable factors that affect both campaign spending and the result of the campaign. It analyzes how wealth inequality among political parties and the costs of information dissemination affect the choice of political platforms and amounts of money spent by each party and shows that all parties have incentives to spend money on the election campaign.