1 / 55

Do Campaign Contribution Limits Matter? Evidence from the McCain-Feingold Act

Do Campaign Contribution Limits Matter? Evidence from the McCain-Feingold Act. Filipe Campante, Harvard Kennedy School & NBER David Yanagizawa-Drott , Harvard Kennedy School Political Economy Seminar, UPF March 14, 2014. Motivation I.

gzifa
Download Presentation

Do Campaign Contribution Limits Matter? Evidence from the McCain-Feingold Act

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. Do Campaign Contribution Limits Matter? Evidence from the McCain-Feingold Act Filipe Campante, Harvard Kennedy School & NBER David Yanagizawa-Drott, Harvard Kennedy School Political Economy Seminar, UPF March 14,2014

  2. Motivation I Big Picture: The role of campaign finance in a democracy • Campaign contributions are controversial • On the one hand, potential positive role • A healthy democracy requires political participation, and monetary contributions by citizens is a form of participation • Can be viewed as a form of free speech • Money can mobilize voters and increase turnout – another form of political participation • Money can improve information • On the other hand, potential negative role • Democratic principle: “One person, one vote” • If money influences elections or policy, political influence may be disproportionally allocated towards donors (and the wealthy in particular)

  3. Motivation II • Campaign finance is heavily regulated • For example, currently in the U.S.: • Individual contributions to federal campaigns are limited to: • $2,600 for any candidate/candidate committee (per election) • $48,600 for all candidates combined, over biennial election period • PAC contributions to federal campaigns are limited to: • Up to $5000 for any any candidate/candidate committee (per election) • Main Question: What are the effects of limiting the amount individuals can give to candidates?

  4. Source: Barber & McCarty (2013)

  5. This paper • The effect of McCain-Feingold Act of 2002 • Raised the limit on individual contributions from $1000 to $2000 • We study its impact on the U.S. House of Rep. • Total Contributions • Party Balance • Political Outcomes • Voter mobilization • Roll-call voting • We use an identification strategy based on how binding the limit was across donors and districts

  6. Literature • Contribution Limits • Surprisingly, we’ve found no study on the effects of federal limits… • State limits (Stratmann & Aparicio-Castillo 2006, Primo & Milyo 2006, Hamm & Hogan 2008, Barber 2013) • Limits affect: polarization, competitiveness of elections, views on government, patterns of candidacy • Identification Problem: changes in state limits are obviously endogenous • Theory • Coate (2004), Ashworth (2006): limits can be welfare-improving • Campaign contributions / spending • Vast literature on effects on electoral outcomes • Inconclusive evidence: Jacobson (1990, 2006), Levitt (1994), Gerber (1998, 2004) (Comparative survey: Scarrow 2007) • Role of individual contributions: Ansolabehere, Figueiredo & Snyder (2003), Barber and McCarty (2013)

  7. Outline of the Talk • Background: McCain-Feingold Act • Data • Empirical Strategy: Revealed Preferences and Limits • Results 1: Summary Stats • Model • Specification • Results 2: District-Level Estimates • Summary

  8. McCain-Feingold Act 2002 • Limits on Individual Contributions to Candidates • Before: $1000 per candidate/election • $25K annual total, including PACs and parties • After: $2000 (indexed for inflation) per candidate/election • $37,500 biannual total for candidates, $57,500 for PACs and parties • Many other provisions… • Ban on “soft money” (unregulated money spent party committees, which could be used to affect federal elections) • Ansolabehere & Snyder (2000): soft money not very important for individual congressional candidates • Limits to repayment of personal loans by candidate • “Stand by your ad”: “I am co-author Filipe Campante, and I approve this message.” • Unchanged PAC contributions

  9. Data • Contributions dataset (Bonica), 1990-2012 • Essentially the universe of contributions • Individual donor id • U.S. House Election outcomes • Leip Election Atlas • Roll-Call Data • DW-Nominate First

  10. Empirical Challenge Empirical Challenge: Identifying the Counterfactual • What would contributions and political outcomes have been had the limit remained $1000? • Observable 2002, fundamentally unobservable after 2002 We approach this challenge in two steps: • STEP 1:We use a simple conceptual framework (Revealed Preferences) to calculate counterfactual contributions • Intuition: Identify donors for which a $1000 limit would bind • STEP 2:We exploit variation in counterfactual contribution levels across Congressional Districts in 2002-04, to estimate impact on political outcomes • Intuition: Exploit that the number of donors where a $1000 limit would bind varies

  11. Computing Aggregate Counterfactual • We apply the conceptual framework on each individual contributor in the 2004 data • Approximately 500’000 individuals • We calculate the counterfactual contribution in 2004, had the limit been $1000 • We define the difference as the causal effect on contributions of having a limit of $2000 instead of $1000, ceteris paribus

  12. District-Level Variation • We want to identify districts where a $1000 limit would have been more binding in 2004 • We aggregate individual counterfactuals for 2004 to the district level • Total and by party

  13. District-Level Variation: Example Texas District 10Texas District 11

  14. District-Level Variation • We define contributions due to the higher limit as: • “McCain-Feingold Contributions 2004” = (Actual 2004) – (Counterfactual 2004)

  15. District-Level Variation: by Party

  16. Effect on Republican Monetary Advantage

  17. Model • Motivated by these facts, we build a very simple model • Extension of Campante (2011) • Organize our thinking about how limits may affect: • Contributions • Parties • Voter turnout • Policy positions

  18. Model: Assumptions • Key ingredients • Individual contributions driven by “consumption” motive • Contributions are a normal good, but individuals can contribute only up to an exogenously set limit • For simplicity: assume that individuals give a certain fraction of their income, up to the limit • Voters’ policy preferences co-vary with income/wealth (e.g. redistribution) • Two ideological parties (“D” and “R”) propose “platforms” with commitment • Parties can use contribution money to increase turnout of their base • E.g. Rosenstone and Hansen (1996) • Diminishing marginal returns • Equilibrium policy is a convex combination of party platforms, with weights given by vote shares • For simplicity, to avoid discontinuities

  19. Model • Prediction 1: An increase in the individual contribution limit increases total individual contributions to each party • Prediction 2: An increase in the individual contribution limit increases total turnout • Turnout effect can be decomposed into two parts: • (I) Mobilization effect  changes in how effectively parties can mobilize their base • (II) Policy effect  change in the size of the parties’ bases, because of shifts in platforms • Prediction 3: An increase in the individual contribution limit may disproportionately benefit either party • Eminently empirical question! • Why? It all depends on how effective the marginal dollar can be in increasing mobilization. • General principle:If Party R (resp. Party D) gets a relative improvement in terms of mobilization, then equilibrium policy must shift to the right (resp. to the left)

  20. Empirical Strategy • We exploit that our counterfactuals give us district-level variation in the infusion of money directly attributable to the McCain-Feingold Act limit increase (“McCain-Feingold Contributions”) • Time-reversed prediction • Intuitively, this 2004 money should “disappear” in 2002 • The McCain-Feingold Act is a shock that differentially hits districts • Similar in spirit to a diff-in-diff, but in reverse • Other idiosyncratic district shocks may of course occur during 2002-04, but this should be a good prediction on average

  21. Empirical Strategy Basic Identification Assumption: Conditional on 2004 levels and 2002-04 changes in the number of contributors and unaffected contributions, 2002-04 district shocks to contributions and political outcomes are uncorrelated with “McCain-Feingold Contributions” in 2004

  22. Example Revisited Texas District 10Texas District 11

  23. Empirical Specification Reduced Form • Standard Covariates: • Number of IndividualContributors (2004 Level and 2002-04 Growth) • UnaffectedIndividualContributions(2004 Level and 2002-04 Growth) • State FixedEffects • AdditionalCovariates: • PAC Contributions(2004 Level and 2002-04 Growth) • Election Controls (2004 RepublicanVote Share and Log Total Votes) • Cluster Standard Errorsby State • IV-2SLS: Instrument for 02-04 Growth in Ind. Contributionsby Log(MCCF) • Additionalassumption: ExclusionRestriction

  24. Placebo Tests Reduced Form • The identificationassumption is equivalent to a “parallel trends” assumption • Toassessthis, we run placebo tests forgrowth in outcomesacrossyears • 2000-02 • 2004-06 • 2006-08 • For these years, we expect: β = 0

  25. Placebo Tests

  26. T1. Individual Contributions

  27. T2. Total Contributions

  28. T3. Ind. Contributions by Party

  29. T4. Voter Turnout, All Parties

  30. Magnitudes • The estimates imply that a 129 000 USD increase (10%) in total contributions leads to approximately 5000 more voters • That is, approximately 26 USD per vote • Compared to GOTV cost-effectiveness estimates (Gerber and Green, 2008) • Door-to-Door: 29 USD/vote • Volunteer phone calls: 38 USD/vote • Election Day Festivals: 28 USD/vote

  31. T5. Voter Turnout, by Party

  32. Effects by Party Increased GOP contributions Increase in GOP votes • A bit puzzling why DEM votes aren’t increasing • Even if REP get a larger boost than DEM, the latter do get more in absolute terms • Maybe REP use the monetary advantage to suppress DEM votes? • “Demobilization Hypothesis” (Ansolabehere et al., 1994) • “Candidates with sufficient resources can, through the use of negative messages, keep voters away from the polls” • Independents found most responsive to negative ads McCain-Feingold Act Increased DEM contributions No increase in DEMvotes

  33. Incumbent Roll-Call Voting Prediction 3: An increase in the individual contribution limit may disproportionately benefit either party • General principle: If Party R (resp. Party D) gets a relative improvement in terms of mobilization, then equilibrium policy must shift to the right (resp. to the left) • We test this using RollCall records • DW-Nominate scores • Timing: Incumbents facing more money in the upcoming elections • We compare within-incumbents changes from the 107th Congress (before 2002) to 108th Congress (after 2002) • Incumbents in both Congresses

  34. T6. Incumbent Roll-Call Voting

  35. Post 2004 Effects? • The effects are estimated on changes in election outcomes between 2002-04 • But McCain-Feingold applies to all elections post 2002 • Since we have counterfactual contributions for all post 2002 years, we can use the estimates and extrapolate the results to later elections Key external validity assumption: • Homogenous treatment effects across election years

More Related