Coalition Formation, Campaign Spending, and Election Outcomes: Evidence from Mexico∗

This paper studies pre-electoral coalition formation and its effect on election outcomes. I estimate a structural model of electoral competition in which: (i) parties can form pre-electoral coalitions to coordinate their candidate nominations, and (ii) parties make strategic campaign spending decisions in support of their candidates. The estimation strategy exploits insights from the literature on entry and competition in markets with differentiated products, with moment inequalities identifying fixed costs of coalition formation. The model is estimated using data from the 2012 Mexican Chamber of Deputies election, which offers district-level variation in coalition formation. I conduct counterfactual experiments to study election outcomes under alternative coalitional scenarios. The results uncover substantial equilibrium savings in campaign expenditures from coalition formation, as well as significant electoral gains benefitting electorally weaker partners. ∗I am extremely grateful to Federico Echenique, Ben Gillen, Erik Snowberg, and especially Matt Shum for their guidance and encouragement. I thank Liam Clegg, Marcelo Fernández, Alex Hirsch, Mat́ıas Iaryczower, Jonathan Katz, Lucas Núñez, Jean Laurent Rosenthal, Euncheol Shin, Gerelt Tserenjigmid, Jay Viloria, Qiaoxi Zhang, and participants in Caltech Proseminars for helpful comments and discussion. I also thank staff at INE and INEGI for their assistance in obtaining the data. †California Institute of Technology. Email: [email protected].