An experimental study of alternative campaign finance systems: Transparency, donations, and policy choices

Abstract

We experimentally study the transparency effect of alternative campaign finance systems on donations, election outcomes, policy choices, and welfare. Three alternatives are considered: one where donors' preferences and donations are unobserved by the candidate and public; one where they are observed by the candidate but not the public; and one where they are observed by all. We label them full anonymity (FA), partial anonymity (PA), and no anonymity (NA), respectively. We find that in NA and PA candidates consistently respond to donations by choosing policies favoring the donors. FA, in contrast, is the most successful in limiting the influence of donations on policy choices. Donors benefit greatly from the possibility of donations whereas social welfare may be harmed in some treatments. To our knowledge, this article is the first to investigate the effect of different campaign finance systems distinguished by their transparency level. (JEL D72)