Kickbacks and Limits on Campaign Donations

Sandwiches will be provided.

Does campaign contribution limits reduce the influence of donors over elected officials and kickbacks for donors? Using a regression discontinuity design that exploits institutional rules determining contribution limits based on registered voters thresholds, we find that looser campaign limits affects donors participation: it reduces the number of donors per candidate and increases the average donations received by the winner of the election. This leads to a higher concentration of donations and increases the influence of fewer donors in campaigns, resulting in more kickbacks in forms of contracts for donors. These contracts tend to be more discretionary and perform worse in terms of timely delivery and cost overruns. To understand the mechanism behind the increased influence when there are looser limits, we propose a model of donors optimal contribution to obtain kickbacks. Our evidence shows that looser campaign limits does increase kickbacks for donors, which leads to worse performing contracts.