John Maloney: "Political Competition, Political Donations, Economic Policy and Growth

Political Competition, Political Donations, Economic Policy and Growth

John Maloney and Andrew Pickering

Abstract: Greater political competition reduces the extent of rent-seeking or resource diversion by politicians in government. However, the potency of this eect depends on whether or not there are limits on donations to candidates standing for election, and on the objectives of donors themselves. Data from the US states suggest that the corruption- political competition gradient is stronger under laissez-faire regimes. Consistent with our notion of weakly benign donors, limits are associated with better policies and stronger growth performance at low levels of political competition, whilst laissez-faire is preferred when political competition is high.