Konishi, Hideo, and Chen-Yu Pan. “Campaign contributions for free trade”. Boston College Working Papers in Economics 926, 2017. http://hdl.handle.net/2345/bc-ir:107447.
Although protectionism became a salient issue in the 2016 presidential election campaign, both Republican and Democratic administrations have been silently promoting free trade for decades. We set up a two-party electoral competition model in a two-dimensional policy space with campaign contributions by a group (exporting/multinational firms) that is interested in promoting free trade, for which voters do not have positive sentiment. Assuming that voters are impressionable to campaign spending for/against candidates, we analyze the optimal contract between the interest group and the candidates on policy issues and campaign contributions. If voters' negative sentiment to free trade is not too strong, the interest group tends to contribute to both candidates to make free trade a nonsalient issue, and the candidates compete over the other (ideological) dimension only. If voters' negative sentiment to free trade is strong, the interest group tends to contribute to a more malleable candidate only.