Do Campaign Contribution Limits Matter?
Evidence from the McCain-Feingold Act
Filipe Campante, Harvard Kennedy School & NBER
David Yanagizawa-Drott, Harvard Kennedy School
Political Economy Seminar, UPF
March 14, 2014
Motivation I
Big Picture: The role of campaign finance in a democracy
–
Campaign contributions are controversial
–
On the one hand, potential positive role
•
•
•
•
–
A healthy democracy requires political participation, and monetary
contributions by citizens is a form of participation
Can be viewed as a form of free speech
Money can mobilize voters and increase turnout – another form of
political participation
Money can improve information
On the other hand, potential negative role
•
•
Democratic principle: “One person, one vote”
If money influences elections or policy, political influence may be
disproportionally allocated towards donors (and the wealthy in particular)
Motivation II
– Campaign finance is heavily regulated
– For example, currently in the U.S.:
•
Individual contributions to federal campaigns are limited to:
–
–
•
$2,600 for any candidate/candidate committee (per election)
$48,600 for all candidates combined, over biennial election period
PAC contributions to federal campaigns are limited to:
–
Up to $5000 for any any candidate/candidate committee (per
election)
– Main Question: What are the effects of limiting the
amount individuals can give to candidates?
Source: Barber & McCarty (2013)
This paper
• The effect of McCain-Feingold Act of 2002
•
Raised the limit on individual contributions from $1000 to $2000
• We study its impact on the U.S. House of Rep.
1.
Total Contributions
1.
Party Balance
1.
Political Outcomes
–
–
–
Voter mobilization
Roll-call voting
We use an identification strategy based on how binding the
limit was across donors and districts
Literature
• Contribution Limits
– Surprisingly, we’ve found no study on the effects of federal limits…
– State limits (Stratmann & Aparicio-Castillo 2006, Primo & Milyo 2006,
Hamm & Hogan 2008, Barber 2013)
• Limits affect: polarization, competitiveness of elections, views on government,
patterns of candidacy
• Identification Problem: changes in state limits are obviously endogenous
– Theory
• Coate (2004), Ashworth (2006): limits can be welfare-improving
• Campaign contributions / spending
– Vast literature on effects on electoral outcomes
• Inconclusive evidence: Jacobson (1990, 2006), Levitt (1994), Gerber (1998,
2004) (Comparative survey: Scarrow 2007)
– Role of individual contributions: Ansolabehere, Figueiredo & Snyder
(2003), Barber and McCarty (2013)
Outline of the Talk
• Background: McCain-Feingold Act
• Data
• Empirical Strategy: Revealed Preferences and Limits
• Results 1: Summary Stats
• Model
• Specification
• Results 2: District-Level Estimates
• Summary
McCain-Feingold Act 2002
• Limits on Individual Contributions to Candidates
– Before: $1000 per candidate/election
• $25K annual total, including PACs and parties
– After: $2000 (indexed for inflation) per candidate/election
• $37,500 biannual total for candidates, $57,500 for PACs and parties
• Many other provisions…
– Ban on “soft money” (unregulated money spent party committees,
which could be used to affect federal elections)
• Ansolabehere & Snyder (2000): soft money not very important for
individual congressional candidates
– Limits to repayment of personal loans by candidate
– “Stand by your ad”: “I am co-author Filipe Campante, and I approve
this message.”
– Unchanged PAC contributions
Data
– Contributions dataset (Bonica), 1990-2012
•
•
Essentially the universe of contributions
Individual donor id
– U.S. House Election outcomes
•
Leip Election Atlas
– Roll-Call Data
•
DW-Nominate First
Empirical Challenge
Empirical Challenge: Identifying the Counterfactual
•
•
What would contributions and political outcomes have been had
the limit remained $1000?
Observable 2002, fundamentally unobservable after 2002
We approach this challenge in two steps:
• STEP 1: We use a simple conceptual framework (Revealed
Preferences) to calculate counterfactual contributions
– Intuition: Identify donors for which a $1000 limit would bind
• STEP 2: We exploit variation in counterfactual contribution levels
across Congressional Districts in 2002-04, to estimate impact on
political outcomes
– Intuition: Exploit that the number of donors where a $1000 limit would
bind varies
Computing Aggregate Counterfactual
• We apply the conceptual framework on each
individual contributor in the 2004 data
– Approximately 500’000 individuals
• We calculate the counterfactual contribution in
2004, had the limit been $1000
• We define the difference as the causal effect
on contributions of having a limit of $2000
instead of $1000, ceteris paribus
The Effect of McCain-Feingold Act on Total Individual
Contributions, 2004
300
Total Individual
Contributions, Million USD
250
200
150
100
50
0
Total 2004
Counterfactual 2004
McCain-Feingold
Effect
Total 2002
District-Level Variation
– We want to identify districts where a $1000 limit
would have been more binding in 2004
– We aggregate individual counterfactuals for 2004
to the district level
– Total and by party
District-Level Variation: Example
Texas District 10
Texas District 11
District-Level Variation
• We define contributions due to the higher limit as:
“McCain-Feingold Contributions 2004” = (Actual 2004) – (Counterfactual 2004)
District-Level Variation: by Party
Effect on Republican Monetary Advantage
The Effect of McCain-Feingold Act on Republican
Advantage in Contributions, 2004
Total Individual
Contributions, Million USD
30
25
20
15
10
5
0
Rep. Advantage in
Contributions, 2004
Counterfactual Rep.
Advantage, 2004
McCain-Feingold Effect on
Rep. Advantage
Model
– Motivated by these facts, we build a very simple
model
•
Extension of Campante (2011)
– Organize our thinking about how limits may affect:
•
•
•
•
Contributions
Parties
Voter turnout
Policy positions
Model: Assumptions
•
Key ingredients
–
–
–
–
–
–
Individual contributions driven by “consumption” motive
Contributions are a normal good, but individuals can contribute
only up to an exogenously set limit
»
For simplicity: assume that individuals give a certain fraction of
their income, up to the limit
Voters’ policy preferences co-vary with income/wealth (e.g.
redistribution)
Two ideological parties (“D” and “R”) propose “platforms” with
commitment
Parties can use contribution money to increase turnout of their
base
»
E.g. Rosenstone and Hansen (1996)
»
Diminishing marginal returns
Equilibrium policy is a convex combination of party platforms, with
weights given by vote shares
»
For simplicity, to avoid discontinuities
Model
–
Prediction 1: An increase in the individual contribution limit
increases total individual contributions to each party
–
Prediction 2: An increase in the individual contribution limit
increases total turnout
•
Turnout effect can be decomposed into two parts:
»
»
–
(I) Mobilization effect  changes in how effectively parties can mobilize
their base
(II) Policy effect  change in the size of the parties’ bases, because of shifts
in platforms
Prediction 3: An increase in the individual contribution limit may
disproportionately benefit either party
»
»
»
Eminently empirical question!
Why? It all depends on how effective the marginal dollar can be in increasing
mobilization.
General principle: If Party R (resp. Party D) gets a relative improvement in
terms of mobilization, then equilibrium policy must shift to the right (resp. to
the left)
Empirical Strategy
• We exploit that our counterfactuals give us
district-level variation in the infusion of money
directly attributable to the McCain-Feingold Act
limit increase (“McCain-Feingold Contributions”)
• Time-reversed prediction
– Intuitively, this 2004 money should “disappear” in 2002
– The McCain-Feingold Act is a shock that differentially
hits districts
• Similar in spirit to a diff-in-diff, but in reverse
– Other idiosyncratic district shocks may of course occur
during 2002-04, but this should be a good prediction
on average
Empirical Strategy
Basic Identification Assumption:
Conditional on 2004 levels and 2002-04 changes in the number
of contributors and unaffected contributions, 2002-04 district
shocks to contributions and political outcomes are
uncorrelated with “McCain-Feingold Contributions” in 2004
Example Revisited
Texas District 10
Texas District 11
Empirical Specification
Reduced Form
growth2002-04ds = b log( McCF _Contributions ds )+ X ds ' d + eds
• Standard Covariates:
– Number of Individual Contributors (2004 Level and 2002-04 Growth)
– Unaffected Individual Contributions (2004 Level and 2002-04 Growth)
– State Fixed Effects
• Additional Covariates:
– PAC Contributions (2004 Level and 2002-04 Growth)
– Election Controls (2004 Republican Vote Share and Log Total Votes)
• Cluster Standard Errors by State
• IV-2SLS: Instrument for 02-04 Growth in Ind. Contributions by Log(MCCF)
– Additional assumption: Exclusion Restriction
Placebo Tests
Reduced Form
growth2002-04ds = b log( McCF _Contributions ds )+ X ds ' d + eds
• The identification assumption is equivalent to a “parallel trends”
assumption
• To assess this, we run placebo tests for growth in outcomes across years
– 2000-02
– 2004-06
– 2006-08
• For these years, we expect: β = 0
Placebo Tests
Individual Contributions
00-02 04-06 06-08
(1)
Log(McCain-Feingold Contributions)
(2)
(3)
All Contributions
00-02 04-06 06-08
(4)
(5)
(6)
Republican Votes
00-02 04-06 06-08
(7)
(8)
-0.007 -0.080 -0.044 -0.007 -0.063 -0.007 -0.021 -0.023
Democratic Votes
00-02 04-06 06-08
(9)
(10)
(11)
(12)
0.020
0.015
-0.017
0.025
(0.045) (0.067) (0.118) (0.041) (0.074) (0.097) (0.038) (0.020) (0.023) (0.030) (0.033) (0.017)
Covariates
Number of Contributors?
State Fixed Effects?
Unaffected Ind. Contributions?
Excl. Uncontested Elections
Observations
R-squared
Yes
Yes
Yes
No
434
0.46
Yes
Yes
Yes
No
433
0.31
Yes
Yes
Yes
No
433
0.15
Yes
Yes
Yes
No
434
0.46
Yes
Yes
Yes
No
433
0.29
Yes
Yes
Yes
No
433
0.18
Yes
Yes
Yes
Yes
346
0.14
Yes
Yes
Yes
Yes
351
0.38
Yes
Yes
Yes
Yes
338
0.55
Yes
Yes
Yes
Yes
336
0.37
Yes
Yes
Yes
Yes
368
0.41
Yes
Yes
Yes
Yes
376
0.26
P-value
0.88
0.24
0.71
0.86
0.40
0.94
0.58
0.26
0.39
0.62
0.60
0.14
T1. Individual Contributions
Dependent Variable: Growth in Individual Contributions
Log(McCain-Feingold Contributions)
2002-04
2002-04
2002-04
2002-04
2002-04
2002-04
(1)
(2)
(3)
(4)
(5)
(6)
0.179*** 0.179*** 0.181*** 0.178*** 0.177***
(0.015) (0.021) (0.022) (0.021) (0.022)
0.167***
(0.021)
Covariates
Number of Contributors?
State Fixed Effects?
Unaffected Ind. Contributions?
PAC Contributions?
Election Controls?
Excluding Uncontested Elections
Observations
R-squared
Yes
No
No
No
No
No
434
0.973
Yes
Yes
No
No
No
No
434
0.975
Yes
Yes
Yes
No
No
No
434
0.975
Yes
Yes
Yes
Yes
No
No
432
0.976
Yes
Yes
Yes
Yes
Yes
No
432
0.976
Yes
Yes
Yes
Yes
Yes
Yes
396
0.980
T2. Total Contributions
Dependent Variable: Growth in Total Contributions
2002-04
2002-04
2002-04
2002-04
2002-04
(1)
(2)
(3)
(4)
(5)
0.153***
0.139***
0.133***
0.095***
0.108***
(0.034)
(0.038)
(0.039)
(0.030)
(0.034)
Number of Contributors?
Yes
Yes
Yes
Yes
Yes
State Fixed Effects?
No
Yes
Yes
Yes
Yes
Unaffected Ind. Contributions?
No
No
Yes
Yes
Yes
PAC Contributions?
No
No
No
Yes
Yes
Election Controls?
No
No
No
No
Yes
Observations
434
434
434
432
432
0.973
0.975
0.975
0.976
0.976
Log(McCain-Feingold Contributions)
Covariates
R-squared
T3. Ind. Contributions by Party
Growth in Individual Contributions, 2002-04
Republican Candidates
Democratic Candidates
(1)
(2)
(3)
(4)
(5)
(6)
Log(McCain-Feingold Contributions)
Covariates
Number of Individual Contributors?
State Fixed Effects?
Unaffected Ind. Contributions?
PAC Contributions?
Election Controls?
Observations
R-squared
0.177*** 0.177*** 0.162***
(0.054) (0.054) (0.060)
Yes
Yes
No
No
No
336
0.951
Yes
Yes
Yes
Yes
No
335
0.951
Yes
Yes
Yes
Yes
Yes
335
0.952
0.186*** 0.177*** 0.169***
(0.049) (0.051) (0.051)
Yes
Yes
No
No
No
330
0.968
Yes
Yes
Yes
Yes
No
329
0.968
Yes
Yes
Yes
Yes
Yes
329
0.968
T4. Voter Turnout, All Parties
Growth in Number of Total Voters, All Candidates
OLS
OLS
OLS
IV-2SLS IV-2SLS IV-2SLS
(1)
(2)
(3)
(4)
(5)
(6)
Log(McCain-Feingold Contributions)
0.0345** 0.0334** 0.0314**
(0.0150) (0.0154) (0.0148)
Growth in Individual Contributions, 2002-04
Covariates
Number of Individual Contributors?
State Fixed Effects?
Unaffected Individual Contributions?
PAC Contributions?
Election Controls?
Observations
R-squared
Yes
Yes
Yes
No
No
398
0.45
Yes
Yes
Yes
Yes
No
396
0.46
Yes
Yes
Yes
Yes
Yes
396
0.47
0.203***
(0.074)
0.199**
(0.078)
0.188**
(0.074)
Yes
Yes
Yes
No
No
398
0.43
Yes
Yes
Yes
Yes
No
396
0.43
Yes
Yes
Yes
Yes
Yes
396
0.44
Magnitudes
– The estimates imply that a 129 000 USD increase
(10%) in total contributions leads to approximately
5000 more voters
– That is, approximately 26 USD per vote
– Compared to GOTV cost-effectiveness estimates
(Gerber and Green, 2008)
•
•
•
Door-to-Door: 29 USD/vote
Volunteer phone calls: 38 USD/vote
Election Day Festivals: 28 USD/vote
T5. Voter Turnout, by Party
Growth in Number of Voters
Republican Candidates
Democratic Candidates
OLS
OLS
IV
IV
OLS
OLS
IV
IV
(1)
(2)
(3)
(4)
(5)
(6)
(7)
(8)
Log(McCain-Feingold Contr.)
0.0449** 0.0511***
-0.0006 -0.0027
(0.0275 (0.0288
)
)
(0.0195) (0.0182)
Growth in Ind. Contributions, 02-04
Covariates
Number of Ind. Contributors?
State Fixed Effects?
Unaffected Ind. Contributions?
PAC Contributions?
Election Controls?
Observations
R-squared
Yes
Yes
Yes
No
No
361
0.2878
Yes
Yes
Yes
Yes
Yes
360
0.3103
0.267***
(0.101)
0.314***
(0.087)
Yes
Yes
Yes
Yes
No
361
0.268
Yes
Yes
Yes
Yes
Yes
360
0.283
-0.003 -0.016
(0.149) (0.157)
Yes
Yes
Yes
Yes
Yes
Yes
No
Yes
No
Yes
350
349
0.2959 0.3143
Yes
Yes
Yes
Yes
No
350
0.296
Yes
Yes
Yes
Yes
Yes
349
0.314
Effects by Party
McCainFeingold Act
Increased GOP
contributions
Increase in
GOP votes
Increased DEM
contributions
No increase in
DEM votes
• A bit puzzling why DEM votes aren’t increasing
– Even if REP get a larger boost than DEM, the latter do get more in absolute
terms
• Maybe REP use the monetary advantage to suppress DEM
votes?
– “Demobilization Hypothesis” (Ansolabehere et al., 1994)
• “Candidates with sufficient resources can, through the use of
negative messages, keep voters away from the polls”
• Independents found most responsive to negative ads
Incumbent Roll-Call Voting
Prediction 3: An increase in the individual contribution limit
may disproportionately benefit either party
•
–
General principle: If Party R (resp. Party D) gets a relative
improvement in terms of mobilization, then equilibrium policy
must shift to the right (resp. to the left)
We test this using Roll Call records
•
–
DW-Nominate scores
Timing: Incumbents facing more money in the upcoming
elections
•
•
We compare within-incumbents changes from the 107th
Congress (before 2002) to 108th Congress (after 2002)
Incumbents in both Congresses
T6. Incumbent Roll-Call Voting
OLS
(1)
Log(McCain-Feingold Contr.)
Conservative Voting, Change in DW-Nominate
Democrats
Republicans
All Incumbents
OLS
IV
OLS
OLS
IV
OLS
OLS
IV
(2)
(3)
(4)
(5)
(6)
(7)
(8)
(9)
0.0059** 0.0058**
-0.0002 0.0002
(0.0025)
(0.0041) (0.0049)
(0.0024)
Growth in Ind. Contributions., 02-04
0.0011
0.0024
(0.0021) (0.0020)
0.032**
0.001
0.014
(0.013)
(0.033)
(0.010)
Covariates
Number of Ind. Contributors?
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
State Fixed Effects?
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Unaffected Ind. Contributions?
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
PAC Contributions?
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Election Controls?
Observations
R-squared
No
183
0.31
Yes
183
0.33
Yes
183
0.28
No
194
0.29
Yes
194
0.29
Yes
194
0.29
No
378
0.19
Yes
378
0.30
Yes
378
0.29
Post 2004 Effects?
• The effects are estimated on changes in election
outcomes between 2002-04
• But McCain-Feingold applies to all elections post
2002
• Since we have counterfactual contributions for all
post 2002 years, we can use the estimates and
extrapolate the results to later elections
Key external validity assumption:
•
Homogenous treatment effects across election years
Concluding Remarks
• The higher limit in McCain-Feingold Act had
significant political consequences:
1. Injected large sums of money into elections
•
•
$70 Million/election (24%)
Unbalanced in favor of Republican candidates
1. Increased mobilization
2. Benefited GOP disproportionally
•
Shift towards more right-wing politics
Concluding Remarks
• Alternative mechanisms:
– Are the effects driven entry of candidates into
primaries?
• We find no evidence of entry effects, for either party
– Other potential mechanisms? (suggestions welcome)
• Mechanisms that remain to be understood
– Why wasn’t there a mobilization effect for Democrats?
• “Demobilization Hypothesis”?
• Currently collecting data on political ads
Thank You!