An empirical test of why incumbents adopt campaign spending limits

Abstract

The fact that incumbents generate and spend more campaign funds than challengers raises the question of why incumbents set campaign spending limits. The Canadian federal elections between 1979 and 2000 are used to evaluate three theoretically plausible explanations: to limit costly effort; to reduce the probability that well-funded candidates buy-off elections; to maximize the incumbent’s vote-share. It is estimated that the marginal benefit of low levels of campaign spending are greater for majority candidates than challengers, but that diminishing returns set in more quickly, indicating that a well-chosen limit could maximize the majority candidate’s vote-share. The actual and estimated optimal majority vote maximizing campaign spending limits compare favorably.