The effect of endogenous campaign spending and voter heterogeneity on candidates' vote share: Empirical evidence from Taiwanese local elections

Abstract

The effect of candidates' campaign spending is conditional on voter characteristics, but this relationship has rarely been examined due to voter anonymity in election data. This paper addresses this concern by using a random-coefficients logit demand model to allow for voter heterogeneity in the estimation, while campaign spending is considered to be endogenous. Using election data from Taiwan, empirical results show that the effect of campaign spending on vote share is positive and significant for the areas with more voters over 65 years old, more high-income earners and fewer college graduates. The results reveal the electoral culture in Taiwan that relies heavily on local power brokers, whose channeling of campaign spending more likely affects older and wealthier but less-educated voters. Empirical results also show that the marginal effect of campaign spending is larger for the challengers than the incumbents, while the vote share is more spending-elastic for the incumbents than the challengers.