This paper concerns public funding of parties. Parties receive public funds depending on their vote share. Funds finance electoral campaigns. Two cases are investigated. In the second, campaigning is informative and all voters are policy motivated.
Public funds increase policy convergence in both cases.
The effect is larger, the more funding depends on vote shares. When campaigns are informative, there may be multiple euqilibria. Intuitively, a large party can stay large since it receives large funds. P16 Download Click here to download the entire document. The paper is available as a an Adobe Acrobat PDF File.