Public funding of parties and political polarization

This work analyzes the impact of asymmetric financial constraints on the platforms of parties, using a formal model of elections. The main results show that when a party faces a tight financial constraint, the platform chosen in equilibrium is further away from its ideal point compared with the case when campaign expenses are unlimited. Moreover, we show that in the presence of asymmetric budget constraints, a financially advantaged party converges to the median voter and a disadvantaged one diverges away. The strength of the latter effect depends on the salience of the policy issue in question. The results are tested by using a dataset of party positions and salience and confirm the theoretical predictions.