Media Briefings

DEEP POCKETS, EXTREME PREFERENCES

  • Published Date: April 2014

DEEP POCKETS, EXTREME PREFERENCES: Why some interest groups donate more than others to political parties

The less mainstream the views of a special interest group, the more likely it is to donate heavily to political party campaigns. That is the central finding of research by Thomas Bassetti and Filippo Pavesi, to be presented at the Royal Economic Society’s 2014 annual conference.

Their study assesses the impact of interest group preferences on campaign contributions for the US House of Representatives in three electoral cycles: 2000, 2002 and 2004. They collect get information on contributions from the Federal Election Commission; and use voters’ perceptions of policies pursued by different business interests (as expressed in Gallup polls) to construct an ‘extremism index’ for each sector.

The analysis reveals that more extreme interest groups contribute more to political parties. On average, a 1% increase in the extremism index is associated with a 0.25% increase in the contributions paid by interest groups.

The authors comment:

‘Different interest groups have different incentives in providing financial support to politicians. In particular, interest groups characterised by policy stances sufficiently close to those of the majority may see less need to finance politicians to support positions that candidates would sustain anyway to win an election.

‘In contrast, interest groups that represent less popular positions will be more willing to invest a larger amount of money to obtain political favours.’

More…

Can electoral campaigns be considered markets for policy favours? According to conventional wisdom, the answer is yes. This perception is also confirmed by entrepreneurs and lobbyists. Recently, a corporate interest group led by Mark Zuckerberg called ‘Human Capitals’ declared: ‘We have individuals with a lot of money. If deployed properly this can have huge influence in the current campaign finance environment.’ (Source: www.politico.com, 4 April 2013).

But as shown by the economic literature, if contributions were to be seen as investments on behalf of interest groups, we should observe greater spending, since the returns to campaigns appear to be comparatively high compared with other investment opportunities.

This study reconciles the conventional wisdom with the question raised by previous studies, namely: Why is there so little money in politics?

The economic and political literature has devoted only limited attention to the relevance of policy preferences of interest groups in determining campaign spending. The main focus has been on determining the impact of contributions on vote shares and estimating whether incumbent or challenger spending is more effective.

Another strand of literature has attempted to pin down the relationship between contributions and policy outcomes with mixed results. This analysis instead focuses on gathering a better insight into the determinants of campaign contributions, in particular, the role played by the relative extremism of the policy stances of contributors.

The authors’ idea is that different interest groups have different incentives for providing financial support to politicians. In particular, interest groups characterised by policy stances sufficiently close to those of the majority, may see less need to finance politicians to support positions that candidates would sustain in any case, to win an election.

In contrast, interest groups that represent less popular positions will be more willing to invest a larger amount of money, to obtain political favours. These contributions will be used by candidates to recover the popularity lost in supporting extreme policies.

By collecting data from different sources, this study assesses the impact of interest group preferences on campaign contributions for the US House of Representatives in three electoral cycles: 2000, 2002 and 2004.

The authors construct a new data set by using information on contributions from the Federal Election Commission (FEC), as well as defining an extremism index for each business sector using a survey question from the Gallup polls. The extremism index allows them to exploit voters’ perceptions of the policies pursued by different business interests, to measure indirectly the relative extremism of each group’s policy preferences.

Empirical evidence confirms the existence of a causal effect of interest groups’ extremism on electoral contributions. On average, the authors estimate that a 1% increase in the extremism index is associated with a 0.25% increase in the contributions paid by interest groups.

ENDS

Notes for editors:

‘Deep Pockets, Extreme Preferences: Explaining Persistent Differences in Electoral Contributions Across Industries’ by Thomas Bassetti and Filippo Pavesi

For further information, contact:

Filippo Pavesi, filippo.pavesi@univr.it, +39 328 325 5281

Romesh Vaitilingam: romesh@vaitilingam.com, +44 7768 661095