Lobbying, campaign contributions, and electoral competition

Abstract

This manuscript version is made available under the CC-BY-NC-ND 4.0 license: http://creativecommons.org/licenses/by-nc-nd/4.0/ which permits use, distribution and reproduction in any medium, provided the original work is properly cited. This author accepted manuscript is made available following 24 month embargo from date of publication (May 2018) in accordance with the publisher's archiving policy ; This paper studies the effect of lobby groups on electoral competition and equilibrium policy outcomes employing a 'money for policy favours' model of lobbying. Our results show that when a lobby group seeks to influence an electoral outcome, it will make a financial contribution to only one political party whose policy is closely aligned to its own ideal policy. When misappropriation of campaign funds occurs, political parties that divert more funds for personal gain stand on more independent platforms and require larger contributions from lobby groups. Greater electoral competition could reduce policy distortions but this, in turn, sparks more intense lobbying thereby increasing the scope of misappropriation of funds. In the case of multiple lobbying, political parties either demand different levels of campaign contributions or leave them with different levels of satisfaction. ; This research did not receive any specific grant from funding agencies in the public, commercial or not-for-profit sectors.