WP 26-05 – When politicians care only about winning, standard models predict that they adopt centrist policies. But if they also value raising campaign funds per se, their agendas diverge — possibly explaining polarization in the politics we see.
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Supersedes Working Paper 18-01 – Greed as a Source of Polarization and Working Paper 22-29 – Polarized Contributions but Convergent Agendas
In a canonical model of policy formation, campaign contributions, and electoral competition, we show that, despite donor polarization, candidates’ agendas converge. If purely office-motivated candidates move away from the centrist agenda, they increase their opponents’ contributions more than their own. An extension that introduces a “job ladder” for the candidates leads to candidates caring about absolute levels of campaign contributions and generates divergence of political agendas in equilibrium. We provide empirical evidence of campaign contributions affecting candidates’ chances of “promotion,” and characterize key comparative statics of the extended model. In the model, caps on campaign contributions lower polarization in equilibrium.
