The Political Economy of Campaign Spending and Checks and Balances

Abstract

This dissertation studies the role of money on election outcomes and the welfare impacts of the system of checks and balances in the context of United States. The first two chapters investigate the impact of campaign spending by their purpose on candidate vote shares. In Chapter 1, I first document the spending composition of U.S. House of Representative candidates. I use transaction level data from 2004 to 2016 to develop 5 alternative spending measures that are distinct in their purpose. I find that incumbents allocate a large portion of their budget towards advertising spending and less on fundraising and indirect expenditures (such as transfers and donations) as the race becomes increasingly tight. Challengers are found to spend at least a quarter of their budget on political advertising and almost never engages in indirect spending. I also document spending patterns by geographical location and incumbent seniority. In Chapter 2, I use data on spending measures developed in Chapter 1 to empirically estimate the effects of disaggregated spending on incumbent's vote share. I find that the incumbent's vote share increases in the incumbent's share of fundraising, advertising, campaign events (such as rallies and canvassing efforts), and indirect spending. I also investigate the differential impact of each type of spending by electoral and candidate characteristics. Chapter 3 studies the costs and benefits to voter expected welfare of having the system of Checks and Balances (CBs). I develop a theoretical framework where government officials differ in their ideologies and their policy preferences are not known to the voters. I found that only extreme voters will ever be hurt by CBs. This occurs whenever the preferred policy of the checker who holds veto rights, is closer to the status quo than to the ideal policy of the proposer, who holds bill proposal rights. I also found that an increase in uncertainty in the checker's political stand may exacerbate the detrimental effects of CBs. On the other hand, uncertainty on the proposer's preferences enhances the benefits of CBs by increasing policy stability.