Campaign contributions as a commitment device
Public Choice, 139, (3-4), . (doi:10.1007/s11127-009-9394-2).
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We explore the idea that the influence of interest groups in elections may have positive economic effects. Since the investment decisions of firms determine economic growth and employment, voters have a common interest in making their governments commit to policies that encourage private investments. However, governments may renege on promises for economic stability and choose excessively leftist policies. Campaign contributions by firms tend to restrain the scope for such opportunism and provide a commitment device. This is achieved if firms, after the policy is chosen, contribute to the governing party or to its rivals.
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