How Much Does Money Matter?

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Abstract
Japanese elections are notorious for the money that flows between contributors, politicians, and voters. To date, however, nobody has estimated statistically the impact of this money on electoral outcomes. Students of American politics have discovered that this question is difficult to answer because, although performance may depend on spending, spending may also depend on expected performance. In this article, the authors specify a two-stage least squares model that explains the vote shares of Liberal Democratic Party (LDP) candidates as a function of their own spending, spending by other candidates, and a battery of control variables. The multiple-candidate nature of Japanese elections means that district-level demographic variables are largely unrelated to any particular LDP candidate's vote share, so that these variables can be used to create instruments for campaign spending. The authors find that the marginal dollar of campaign spending buys the spender a great deal more in Japan than is true in the United States.