Do Campaign Contribution Limits Curb the Influence of Money in Politics?

The forthcoming article “Do Campaign Contribution Limits Curb the Influence of Money in Politics?” by Saad Gulzar, Miguel R. Rueda and Nelson A. Ruiz is summarized by the author(s) below. 

The influence of money in politics has been a cause for concern across the world. Over 40% of countries have adopted laws limiting campaign contributions and, in many of them, curbing the influence of money in politics was one of the main motivations for such reformsWe evaluate the efficacy of this institution in a new paper. 

We study this question in Colombia, where the story of the mayor of Amalfi exemplifies the broad patterns we see in the dataBefore the election, one donor alone contributed 3000 dollars, equivalent to 22% of the total contributions to the mayor’s campaignWhen the mayor won the election, the donor signed 86 contracts with the municipality worth more than half a million dollars. Of these contracts, only five were awarded via competitive tender. Can campaign contribution limits reduce the benefits accrued by donors? 

Considering the case of mayors systematically, we first establish that donating to political candidates carries kickbacks. With a regression discontinuity design, we show that donors of mayoral candidates who barely win an election are more likely to receive a public contract after the election than those donors who contributed to a candidate who barely lost the election. Donors to a winning candidate receive, on average, three more contracts from the elected mayor than those received by donors of the runner-up. This is a large increase, representing 184% of the average number of contracts that donors to the two top candidates receive.  

In Colombia, campaign contribution limits change discontinuously at certain thresholds related to the number of registered voters such that moving from a municipality just under the threshold to one just above loosens campaign contribution restrictions on the total amount from approximately 17,000 to 32,000 U.S. dollarsUsing a regression discontinuity design, we show that looser campaign limits (those that allow more money in politics) concentrate the influence of donors by raising the average contribution per donor and by increasing the share of campaign contributions that come from top donors. In particular, the share of a top donor’s contributions in campaign revenues is 9.1 percentage points higher in looser limit municipalities than in those with more restrictive campaign finance regulations. Next, we find that the increased weight of donors in the winner’s campaign under looser campaign limits translates into larger benefits to donors via contracts: a donor to the winning candidate receives three more public contracts than those she would have received under more restrictive campaign contribution rules. 

Finally, and perhaps most importantly, we establish that this outsized influence of money in politics brought by looser campaign finance regulations is affecting the execution of public contracts. We show that looser limits increase the value of costs overruns of contracts managed by donors by 214% 

Overall, looser campaign contribution limits increase the weight top donors contributions have in winning campaigns’ revenues, the benefits via contracts that donors to the election winner receive, and the costs society pays for such contracts. This evidence is consistent with campaign contribution limits curbing the influence of money in politics. 

About the Author(s): Saad Gulzar is Assistant Professor, Department of Political Science at Stanford University, Miguel R. Rueda is Assistant Professor, Department of Political Science at Emory University and Nelson A. Ruiz is Lecturer, Department of Politics and International Relations at University of Oxford. Their research “Do Campaign Contribution Limits Curb the Influence of Money in Politics?” is now available in Early View and will appear in a forthcoming issue of the American Journal of Political Science. 

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The American Journal of Political Science (AJPS) is the flagship journal of the Midwest Political Science Association and is published by Wiley.