Campaign Contributions as Investments: The U.S. House of Representatives, 1980-1986

Abstract

This paper treats the market for special-interest campaign contributions and political "favors" as a simple asset market. The model yields a simple equilibrium relationship among three variables: the total amount of investor contributions a candidate receives, the monetary value of the favors he has promised, and his probability of winning. Using data on open-seat races for the U.S. House of Representatives, I confront the model with a series of tests. Despite the starkness of the model, the results of these tests are highly supportive.