Campaign finance regulations and policy convergence: the role of interest groups and valence

Abstract

Regulation of campaign finance of political parties and candidates is intended to decrease the political influence of special interest groups and enhance the public interest in electoral outcomes. I investigate empirically the consequences of campaign financing regulations and find that public funding leads parties' platforms to diverge whereas ceilings on individual contributions lead to platform convergence to the median voter outcome. I relate these consequences to differences in valence or intrinsic popularity of parties. I also show that platform divergence is associated with a ban on corporate donations and with requirements of public disclosure of parties' income statements.