Effects of public funding on electoral outcomes

Abstract

Many countries have implemented public funding to help citizens participate in an election. I build a citizen-candidate model in which citizens can enter an electoral competition race for office as a political candidate. I consider a public funding program: The entrance is costly, but an entering candidate receives a subsidy that fully compensates the entrance cost if her vote share is higher than a qualification threshold. On the one hand, due to the full compensation, some citizens may enter the race even if they lose for sure in the election. On the other hand, competition becomes more intense because of those surely-losing candidates' presence. Consequently, electoral outcomes such as the winner's position substantially change. I characterize equilibrium under the consideration of public funding. Furthermore, I analyze how the public funding program affects the number of running candidates, their policy diversity, the winner's position, and voters' welfare.