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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 how several conclusions in the literature may be modified by the interaction with small donors. Throughout, we discuss the empirical implications of our findings. ; info:eu-repo/semantics/published

Individual citizens are the largest source of contributions for congressional candidates in the United States. This paper investigates if and how fundraising from this source is related to the ideological positions of candidates. Specifically, we ask whether the amount of contributions depends on: (1) the extremity of candidate ideology; and (2) the level of candidate divergence in the same race. These results have important implications for candidate positioning strategies, as well as for evaluating the effects of recent campaign finance reforms. Adapted from the source document.

AbstractIndividual campaign contributions are the largest source of financing for U.S. presidential and congressional candidates, though the body of research examining why people give remains small. To help understand these decisions, we estimate the causal impact of house prices on donations across campaigns and parties using an instrumental variables strategy. Our results indicate that an increase in house prices increases ZIP code‐level donations to Democratic presidential and congressional candidates, with minuscule or no effect for Republican candidates. The effects in areas with a greater proportion of renters are larger than areas with more homeowners. Since this population is likely to experience higher rents as a result of house price increases, this suggests that pleas for policy may inspire giving. Further, areas with the highest fraction of college educated residents also see the largest effects, when compared to less‐educated areas, suggesting a wealth effect exists as well.

ABSTRACTAre professional lobbyists loyal partisans? There are thousands of professional lobbyists in Washington, D.C., who work with members of Congress and their staffs, many of whom also make contributions to congressional candidates and political parties. Although many lobbyists have backgrounds in partisan politics, they may have incentives to give money to candidates from both parties. This article finds that professional lobbyists tend to make personal contributions to their preferred party exclusively.

Abstract
Popular and academic discussions have mostly concentrated on large donors, even though small donors are a major source of financing for political campaigns. We propose a theory of small donors with a key novelty: it centres on the interactions between small donors and the parties' fundraising strategy. In equilibrium, parties micro-target donors with a higher contribution potential (that is, richer and with more intense preferences) and increase their total fundraising effort in close races. The parties' strategic fundraising amplifies the effect of income on contributions, and leads to closeness, underdog and bandwagon effects. We then study the welfare effects of a number of common campaign finance laws. We find that, due to equilibrium effects, those tools may produce outcomes opposite to intended objectives. Finally, we identify a tax-and-subsidy scheme that mutes the effect of income while still allowing donors to voice the intensity of their support.