Campaign Finance Limits? Not So Harmless After All

In many countries worldwide, campaign contribution limits are implemented to restrict money's political influence. However, their actual effectiveness remains unclear. This paper examines the effects of these limits using a regression discontinuity design (RDS) based on Colombia's municipal contribution rules. Our analysis reveals that looser limits lead to more public contracts going directly to campaign donors after elections.

Specifically:

• Data & Methods: We employed an RDS exploiting Colombian institutional contribution thresholds.
• Key Findings:
• Looser post-election contribution limits significantly increased the number of public contracts assigned to winning candidates' top donors.
• This finding suggests that relaxed limits primarily influence post-election allocation rather than pre-election outcomes or who gets elected.

These results challenge simplistic views by showing:

• Limiting donation power doesn't necessarily reduce post-election access for donors.
• Looser constraints increase donor control over public contracts, not just their political voice.

Furthermore, our findings have important implications:

• Public spending favors specific interests (donors).
• Contract performance worsens: Contracts awarded to winning candidates' backers are more likely to exceed budgeted costs. This suggests kickbacks or preferential treatment may be facilitated by looser contribution limits post-election.

Overall, this research demonstrates a clear link between relaxed campaign contribution regulations and potentially corrupt outcomes in public procurement following elections.