Contribution limits and the effectiveness of campaign spending

Much work on the apparent ineffectiveness on incumbent spending in congressional elections has hypothesized that the productivity of incumbent spending is low because incumbents operate on the “flat part” of their election returns function. Differences in campaign spending associated with state campaign finance laws allows for a test of this hypothesis because restrictions on campaign contributions tend to reduce campaign spending. Exploiting cross-state variation in campaign finance laws, this study tests whether campaign expenditures by state House candidates are more productive when candidates are subject to contribution limits. The results show that campaign expenditures by incumbents and challengers are more productive when candidates run in states with campaign contribution limits, as opposed to in states without limits. In states with contribution limits, incumbent spending and challenger spending are equally productive, and spending by both candidates is quantitatively important in increasing their vote shares.