Do Low Contribution Limits Insulate Incumbents from Competition?

Abstract

WHETHER CAMPAIGN FINANCE reform improves the competitiveness of elections is a vigorously debated issue. Some observers claim that limits on the size of contributions are inherently biased in favor of incumbents. These scholars reason that campaign contribution limits prevent challengers from mounting effective campaigns (Smith 1995). Others argue that restricting contributions may be the only way for challengers to even the playing field. These scholars reason that incumbents have a large advantage in fundraising and that limits curtail this advantage (Eom and Gross 2006). Given the recent Supreme Court decision that disallowed Vermont’s contribution limits on the grounds that they were too low, it is important to investigate the effect of low limits on the competitiveness of elections.1 This article fills this gap in the literature. Scholars have analyzed the effects of contribution limits on competitiveness in elections, with most of the recent findings showing that limits lead to closer margins of victory and help challengers at the expense of incumbents (Eom and Gross 2006; Milyo, Primo and Groseclose 2006; Stratmann and Aparicio-Castillo 2006). These studies examine contribution limit amounts in a linear fashion and do not measure non-linearities that may conceal variations in the marginal effect of contribution limits, depending on whether limits are high or low. Further, these studies do not focus on low limits, which I define here as an individual contribution limit of $500 or lower per election cycle. The large variation in state-level campaign finance regulations facilitates study of the effects of these regulations on the competitiveness of state elections. In addition to variability across states, there is also variation over time, since some states have changed their laws, particularly since the late1970s. This study treats each of the states with singlemember districts as a campaign finance reform laboratory.2 It examines the effects of these laws between 1980 and 2006, using the following as measures of the competitiveness of elections: the difference in the vote share between an incumbent and a challenger, whether the incumbent receives more than 55 percent of the popular vote, whether the incumbent receives 85 percent or more of the popular vote, whether the incumbent wins, and the number of candidates. I consider primarily individual contribution limits, since individual contributions comprise the majority of contributions to candidates. However, I also examine the effect of political action committee (PAC) contribution limits on the competitiveness of elections. One difficulty in studying the effect of campaign finance laws on election outcomes is that there are potentially confounding factors. For example, the same conditions that determine whether a contribu-