Do Campaign Contribution Limits Curb the Influence of Money in Politics?

Over 40% of countries around the world have adopted limits on campaign contributions to curb the influence of money in politics. Yet, we have limited knowledge of whether and how these limits achieve this goal. Using a regression discontinuity design that exploits institutional rules on contribution limits in Colombian municipalities, we show that looser limits increase the number of public contracts assigned to donors to the elected candidate. This is explained by looser limits increasing the influence of top donors over the elected candidate, rather than reducing electoral competition or changing who is elected to office. We further show that looser limits worsen the quality of public contracts given to the winner's donors: These contracts are more likely to run over their stipulated costs. Overall, this article links looser campaign contribution limits, donor kickbacks, and worse performance of contracts awarded to donors.