The welfare effects of political money in regulation

Lodato, Simon ORCID: https://orcid.org/0000-0002-7536-527X (2018) The welfare effects of political money in regulation. In: Essex Internal Seminar, Feb 2018, University of Essex, UK. . [Conference or Workshop Item]

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Abstract

Corporations devote costly efforts to gain access to politicians before elections. The consequent connection between private interests and candidates takes many forms and commonly result in a welfare loss. I then investigate how different types of private interests' pre-electoral contributions affect the choice of a regulatory policy and its welfare consequences. I develop a model where, before candidates announce their policy platforms, a privately informed firm that operates in a regulated market either contributes to candidates' campaigns with a fixed amount or promises a fraction of future profits. I study how these two contribution schemes affect the welfare of voters (and candidates) and the transference of the firm's private information. I also discuss how the welfare effects of the campaign-finance laws depend crucially on the possibility of identifying these two different ways of connection between candidates and private interests.

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