Campaign Cost and Electoral Accountability

The increasing cost of campaigns and its implications for the performance of the electoral process are issues of paramount importance in modern democracies. We propose a theory of electoral accountability where candidates choose whether to propose a socially beneficial policy and whether to pay a campaign cost to advertise their platform. Higher campaign cost decreases voters' welfare when partisan imbalance is low. However, when partisan imbalance is high, a higher campaign cost is associated with a higher overall probability of socially beneficial policies: electoral campaigns can have a rebalancing effect. Empirical evidence from congressional elections is in line with the model's main prediction: higher cost of political ads is associated with lower federal transfers for low levels of partisan imbalance, but weakly higher transfers for highly partisan districts