How Do Campaign Spending Limits Affect Electoral Competition?: Evidence From Great Britain 1885-2010

In half of the democratic countries in the world, candidates face legal constraints on how much money they can spend on their electoral campaigns, yet we know little about the consequences of these restrictions. I study how spending limits affect electoral competition in British House of Commons elections. On the basis of archival material, I have collected new data on the more than 58,000 candidates who ran for a parliamentary seat from 1885 to 2010, recording how much money each candidate spent, and the spending limit they faced. To identify causal effects, I exploit within-constituency variation in spending caps induced by reforms of the spending-limit formula that affected some, but not all constituencies. Consistent with theoretical predictions from a contest model, the results indicate that when the level of permitted spending is raised, campaigns become more expensive, fewer candidates run for office, the proportion of wealthy candidates increases, and the financial and electoral advantages enjoyed by incumbents are amplified.