Troumpounis O. (2012)

On the distribution of public funding to political parties. Economics Letters, vol. 116, pp. 367-370.

Abstract:

The distribution of direct public funding to political parties is based on two criteria: (1) performance at the election (funding per vote), or (2) representation in the parliament (funding per seat). Using a two-party group turnout model, we compare the effect of the two funding systems on parties’ mobilization effort and the equilibrium turnout. Allowing one party to have a larger support than the other, we uncover interesting differences regarding the equilibrium structure: while in the unique equilibrium of per seat funding systems both parties exert the same amount of effort, a per vote funding system results in an asymmetric equilibrium in which the advantaged party exerts higher effort than its opponent. We furthermore show that, at the same cost, a per vote funding system always yields higher turnout than a per seat funding system, sacrificing the representativity of the electoral outcome.