The Pro-Competitive Effect of Campaign Limits in Non-Majoritarian Elections.∗

We study a model of elections in non-majoritarian systems that captures the link between competition in policies and competition in campaign spending. We argue that the overall competitiveness of the political arena depends both on the endogenous number of parties contesting the election and the endogenous level of campaign spending. These two dimensions are linked together through their combined effect on the total equilibrium level of political rents. We illustrate the key insights of the model through the analysis of two major electoral institutions: campaign spending limits and compulsory voting. In particular, we show that under some conditions spending caps and compulsory voting can be pro-competitive, leading to an increase in the number of parties contesting the elections. Journal of Economic Literature Classification Numbers: D72, D78, C72. ∗Mattozzi acknowledges financial support from the National Science Foundation, SES-0617901. †Division of Humanities and Social Sciences, California Institute of Technology, Pasadena, California 91125, USA, email: [email protected]