Public funding of political parties

This paper studies the typical European system for public funding of parties, where parties receive public funds depending on their vote share. These funds finance electoral campaigns. It is shown that such a funding system increases policy convergence. The effect is larger, the more funding depends on vote shares. If the parties have access to other means of campaign finance given in a lump-sum way, the effect is moderated.Ortuno-Ortin gratefully acknowledges financial support from the Spanish Ministry of Education through grant CICYT PB-970131Publicad