Aggregate Effects of Campaign Spending

Abstract

Perhaps no other issue surrounding the health of our democracy worries American voters more than the role of money in elections, and campaign finance reform is a salient topic as a result. Academic studies of campaign finance, however, have focused their analyses at the level of the individual campaign -- relevant for a variety of important questions but not calibrated for studying the impact of policy instruments that affect the entire legislature at once. I offer a new focus on the systemic effects of campaign spending. Using a natural experiment in U.S. state legislatures, I find that a ten percentage point increase in the Democratic (or Republican) share of total campaign contributions causes a five percentage point increase in the Democratic (or Republican) share of the legislature. Campaign spending has a large effect on electoral outcomes, and regulations on which groups are permitted to donate are a potent policy lever.