Public funding and electoral competition

A common justification for the introduction of DPF is its ability to increase equality in elections (Kölln, Reference Kölln2016). As subsidization increases “fund parity” between parties (Potter and Tavits, Reference Potter and Tavits2015) means that DPF ensures that smaller parties have the resources to compete (Nassmacher and Nassmacher, Reference Nassmacher, Nassmacher, Alexander and Nassmacher2001; Scarrow, Reference Scarrow2007). These normative claims have been tested within the US context, where some State-level “clean elections” programmes allow candidates to opt in for subsidization, in exchange for a prohibition on the use of privately-sourced monies (Klumpp et al., Reference Klumpp, Mialon and Williams2015; Malhotra, Reference Malhotra2008). Comparing the results of elections across the US states, Mayer et al. (Reference Mayer, Werner, Williams, McDonald and Samples2006) observed that those that had introduced subsidies had lower incumbent re-election rates than those that had not. These observations translate to nation-level studies of the early 21^st Century. Focussing on a sample of ten developed democracies, Casas-Zamora (Reference Casas-Zamora2005) conducted a comparative study of electoral dynamics before and after the enactment of state funding programmes. Findings indicated that, due to the diminishing returns of electoral expenditure (see Jacobson, Reference Jacobson1978) and the declining centrality of membership fees in party funding, subsidies were influential in allowing minor parties to compete in elections. Comparable observations are made in studies of Canada, where the introduction of the “quarterly allowance” subsidy – distributed on a per vote basis – grew the Bloc Québécois and Greens into longstanding parties, and allowed the New Democratic Party to briefly supplant the Liberals as Canada’s official opposition (Pelletier, Reference Pelletier, Mendilow and Phélippeau2018). The significance of DPF for Canadian parties is illustrated by the opposition’s determination to bring down the Conservative government, which tried to eliminate state funding under the guise of an economic crisis (Koß Reference Koß2010: 1).

Although these findings suggest a positive association between DPF and electoral competition, critics argue that subsidies increase the cost of elections, generate resource advantages for incumbents, and attract poor-quality electoral challengers (Donnay and Ramsden, Reference Donnay and Ramsden1995; Mayer and Wood, Reference Mayer and Wood1995). Further literature suggests that, while DPF may provide a degree of competition, it has the potential to stymie the progress of those positioned outside of the dominant “cartel” (Hopkin, Reference Hopkin2004; Nwokora, Reference Nwokora2014; van Biezen and Casal Bértoa, Reference van Biezen, Casal Bértoa, Fernandes, Magalhães and Costa Pinto2022). In some cases, DPF may be used as a tool for incumbents to decrease competition (Piccio and van Biezen, Reference Piccio, van Biezen, Mendilow and Phélippeau2018). As Greene (Reference Greene and Butler2010) outlines, Mexico’s Partido Revolucionario Institucional – in power in various guises between 1921 and 2000 – and the Botswana Democratic Party – in government between 1966 and 2024 – co-opted state resources to sustain their respective incumbencies. Moreover, in post-communist contexts, Grzymała-Busse notes that weak opposition parties embolden incumbents to engage in rent-seeking from the state “with minimal constraint” (Reference Grzymała-Busse2003: 1145). When facing strong opposition, parties in these contexts were more likely to introduce formal DPF mechanisms to cushion the financial consequences of electoral defeat (Grzymała-Busse, Reference Grzymała-Busse2007). These cases suggest that, within certain political-institutional contexts, the use of public funding may advance a perpetual cycle of incumbent electoral victories. In essence, “the winners win twice”; first, by gaining the privilege of executive office; and second, by winning access to the resources of the state for future electioneering (van Biezen and Kopecký, Reference van Biezen and Kopecký2007: 251). Ultimately, where the availability of subsidies generates extreme resource imbalances in favour of the governing party, DPF may insulate the incumbent from competition.

In short, state subsidization of electoral contests cannot be viewed as a panacea for issues linked to competition. When implemented, the effects of DPF are likely to be driven by the wider system of regulations within which they fit. As Tham (Reference Tham2010) notes, absent of expenditure limits, subsidization solely serves to increase the costs of elections, which introduces a higher entry tariff for prospective candidates. Additionally, the timetabling of remittances is important: if paid as a post-election reimbursement, DPF favours those who have access to greater resources prior to the election (Lipcean, Reference Lipcean2022). To summarize, it is not simply the presence or absence of DPF that determines its apparent impact on the competitiveness of elections, but the entire mechanism of public funding, including the subsidy level, eligibility and allocation criteria, as well as the timing of disbursement (Lipcean, Reference Lipcean2019; van Biezen, Reference van Biezen2004).

While this is a fairly well-developed area of literature which offers numerous insights into the relationship between DPF and electoral competition, there is room for further development. Many studies discussed here are case studies which, while offering a useful picture of specific contexts, may be limited in their portability. Where comparative literature does exist, it is often regionally concentrated – either at the level of US States, or European contexts.

Public funding and political parties

An additional subset of financing literature focuses on how the availability of subsidies impacts party decisions to persist and survive (Spirova, Reference Spirova2007). To this end, the likelihood that political parties continue to seek their goals – despite short-term defeats – is observed to vary depending on the type and amount of funding available. This is particularly important for extra-parliamentary parties which, deprived of the benefits of representation, can use subsidies to guarantee a minimum level of financial support (Casal Bértoa and Taleski, Reference Casal Bértoa and Taleski2016; Casal Bértoa and Walecki, Reference Casal Bértoa, Walecki, van Biezen and Casal Bértoa2018; Danielyan et al., Reference Danielyan, Manougian, Casal Bértoa, Casal Bértoa and Tsutskiridze2024). Empirical studies from the European context (but Ibenskas and van De Wardt, Reference Ibenskas and van de Wardt2023) find a positive association between DPF and party survival. Casal Bértoa and Spirova (Reference Casal Bértoa and Spirova2019) found that 92% of parties across 14 post-communist democracies receiving state funding were able to survive, compared to less than 50% of those financed exclusively by private donors. Bolleyer (Reference Bolleyer2013) makes similar observations in a study of 140 new parties in 17 Western European democracies. Summarizing these effects, Bolleyer and Ruth (Reference Bolleyer and Ruth2018: 291) note that subsidies increase the capacity of party elites to “build a routinized infrastructure [with] party officials who establish routines and standard operating procedures […], socializing followers into party rules” and, consequently, increasing their level of autonomy, behavioural routinization and structural systemness (Casal Bértoa et al., Reference Casal Bértoa, Heapy-Silander and Lynge2024; Levitsky, Reference Levitsky1998; Panebianco, Reference Panebianco1988; Randall and Svåsand, Reference Randall and Svåsand2002).

Perhaps the most well-known text on the links between DPF and party organization comes from Katz and Mair (Reference Katz and Mair1995), whose “cartel party thesis” denotes that the widespread use of subsidies in Western Europe developed due to long-term declining party membership.Footnote ⁶ Responding to this, major party “cartels” cooperated on legislation to introduce public subsidies and ensure their collective survival. Under a cartelized system, parties transitioned from “voluntary private associations” to “public utilities” (van Biezen Reference van Biezen2004: 702) and, with a strengthening linkage between parties and the state, became less connected to civil society. This shift has ramifications for the quality of representation, as parties become less accountable to the electorate (Mendilow and Rusciano, Reference Mendilow, Rusciano, Alexander and Nassmacher2001; Piccio, Reference Piccio, Falguera, Jones and Ohman M2014). Whiteley (Reference Whiteley2011, Reference Whiteley2014) observes these patterns in a series of European-focussed studies, finding excessive state regulation of political party activity – including the use of DPF – to be associated with reduced membership, trust and party identification.

While these studies suggest a negative association between subsidization and democratic responsiveness, further literature questions this relationship. Kitschelt argues that subsidization “does not enable [established parties] to ignore relations of responsiveness and accountability with the electorate” (Reference Kitschelt2000: 174), while van Biezen and Kopecký (Reference van Biezen, Kopecký, Scarrow, Webb and Poguntke2017: 101) find a positive correlation between subsidies and party membership, concluding that DPF “could in fact be a good investment to preserve citizen engagement in party politics” (emphasis added). Costa Lobo and Razzuoli (Reference Costa Lobo, Razzuoli, Scarrow, Webb and Poguntke2017: 119) arrive at a similar conclusion noting that “the higher the level of state funding a party receives, the greater the likelihood that its voters will feel it does make a difference who one votes for, or who is in power” (italics in original).Footnote ⁷ Moreover, as subsidies “free candidates from spending large amounts of time ‘dialling for dollars’ or making personal appeals to prospective donors,” Francia and Herrnson (Reference Francia and Herrnson2003: 535) observe that publicly funded candidates in US State elections spend more time communicating with voters. In sum, these findings suggest that public funding does not increase the distance between parties and their voters, at least in terms of responsiveness and political efficacy. What remains to be the subject of extensive empirical study, however, is the impact of DPF on wider aspects of the party organization, including their level of nationalization, leadership stability, branch structure (e.g., size, complexity), professionalization, and internal cohesion (e.g., unity, switching).

Public funding and party systems

A body of literature that examines the impacts of DPF at the party system level developed following publication of the cartel party thesis (Katz and Mair, Reference Katz and Mair1995, Reference Katz and Mair2009). Relationships in this area are complex, as theoretical arguments relating to the impact of subsidies in areas such as party system size, stability, polarization, electoral volatility and the emergence of new parties, often differ based on the parameters of the DPF mechanism. Contrasting the prior view that state funding had a negative impact on competition and the democratic linkage, more recent studies identified DPF as a crucial factor in promoting the “institutionalization” of the party system; itself an essential condition for the survival of democracy (Casal Bértoa, Reference Casal Bértoa2017a). Theoretically, the mechanism through which DPF is likely to positively impact party system stability is by providing guaranteed resources with which to build strong, professional party organizations (Katz, Reference Katz2022). This enables parties to maintain contact with the electorate and strengthen links between parties and voters, making the partisan preferences of the electorate predictable over time. By reinforcing the legitimacy of political parties, proponents of DPF argue that subsidies assist parties in establishing routinized patterns of behaviour which, in turn, increases citizens’ trust in the democratic process. Finally, DPF helps rival parties to interact in a routinized manner that makes the structure of inter-party competition predictable over time. By boosting electoral stability, keeping the balance of power among parties, and discouraging major parliamentary turnovers, state subsidies allow for stable patterns of competition between familiar and ideologically closed political parties (Casal Bértoa, Reference Casal Bértoa2017b). Consequently, where DPF is available, the number of parties is expected to remain consistent, making coalitions more stable and governments durable.

Building on these theoretical foundations, empirical studies have identified a stabilizing effect of political finance regulation and DPF on party systems in Africa, Europe, and Latin America. Examining a sample of both old and new European democracies, van Biezen and Rashkova (Reference van Biezen and Rashkova2014: 890) observe that heightened state regulation of parties across numerous dimensions “decreases the number of successful new entries.” Despite this, they fail to identify an independent effect for DPF. Sanches (Reference Sanches2018) examines the same relationships in Africa, finding greater levels of regulation on party finances to be positively associated with party system institutionalization (PSI). In the post-communist context, DPF has been identified as a factor in deterring new party entry, decreasing electoral volatility, and reducing party system size (Birnir, Reference Birnir2005; Booth and Robbins, Reference Booth and Robbins2010; Spirova, Reference Spirova2007). This, in turn, makes the party system more manageable for voters, and governable, for elites. Comparable patterns are observed in studies of Latin America. Using more objective data, including actual levels of state funding for presidential elections and measures of electoral volatility, party penetration, party system legitimacy, and the strength of party organization, Bruhn (Reference Bruhn, Levitsky, Loxton, Van Dyck and Domínguez2016) finds that public funding correlates positively with PSI. Su (Reference Su2022) arrives at a similar conclusion by examining the eligibility threshold for state subsidies and electoral volatility in 18 Latin American polities over time. As access to DPF becomes more widespread due to lower payout thresholds, party system volatility, resulting from the replacement of old parties with new ones, diminishes.

This final finding appears counter-intuitive, since lower payout thresholds can stimulate, at least the emergence, if not the success, of new party entry. Such an idea receives empirical support from studies of established democracies. For instance, Hug (Reference Hug2001: 101–102) shows that the number of new party entries is higher in nations where DPF is available. Likewise, Hino (Reference Hino2012: 79–80) finds DPF to be associated with a larger vote share for challenger parties. Studies incorporating DPF in composite indices of fund parity arrive at similar conclusions: more equitable access positively correlates with the “effective number” of legislative parties (Potter and Tavits, Reference Potter and Tavits2015: 83), albeit this association is stronger for new democracies (Rashkova and Su, Reference Rashkova and Su2020: 42). These results do not align with the cartel party thesis, concluding that an increased reliance on the state does not freeze party competition (Pierre et al., Reference Pierre, Svåsand and Widfeldt2000; Scarrow, Reference Scarrow2006).

Despite anti-cartel evidence, other research point to a more complex relationship between subsidies and party system dynamics. As Bowler et al. (Reference Bowler, Carter, Farrell, Cain, Dalton and Scarrow2003: 93–94) show, while new parties have gained access to public funding and subsidized media, these changes have often been accompanied by significant increases in subsidies to established parties, thereby reinforcing their resource advantage, which “continues to hinder the competitive potential of new parties.” Moreover, although electoral reforms have tended to facilitate access to direct and indirect public funding to non-parliamentary parties, the disproportional allocation of resources between incumbents and challengers, benefiting the former, has not boosted electoral competition, as reflected by a lower number of effective electoral parties (ibid: 95–96). Likewise, other research discovers similar trends regarding the access to state funds but highlights the variation in the degree of cartelization across western democracies, conditional on the established parties’ ability “to preserve their systemic positions through the creation of a cartel where competition is managed and the spoils of the state are shared between the ‘insiders’” (Loomes, Reference Loomes2013: 188).

Consequently, the scarcity of private funding makes public funding an extremely valuable and attractive resource, thus incentivising potential challengers to organize and compete for office in the hope that public funding will help to overcome the shortage of private funding. While some recent studies propose to design political financing arrangements from a normative perspective (Bonotti and Nwokora, Reference Bonotti and Nwokora2024), the omission of political calculations from the design of financing regulations as a strategic tool, as well as a lack of empirical testing, make it difficult to assess the model’s feasibility and applicability in real-world scenarios.

Another strand of research concerns the impact of DPF on the ideological makeup of the party system (Baron, Reference Baron1994). Bichay (Reference Bichay2020) observes that parties of the extreme-right disproportionately benefit from the provision of public subsidies. Using the Austrian case, he notes that the elevation of the far-right Freedom Party to the second largest parliamentary party – and coalition partner to the People’s Party – in 1999, was the product of “dramatic” increases in subsidization levels in the 1970s and 1980s (2020: 9). Supporting this finding, Kilborn and Vishwanath (Reference Kilborn and Vishwanath2022: 742) found that candidates who opted into full public funding in US States were “more ideologically extreme and less representative of their typical constituent,” relative to those that forewent subsidies. Two reasons are suggested for this effect: (i) the provision of public resources to electoral candidates provides opportunities that were previously unavailable to those from the ideological fringes, and (ii) candidates that opt into public funding may shift their ideological position away from the typical voter.

Although these studies indicate that subsidies may have a polarizing impact, additional literature finds that public funding of political parties, both for electoral campaigns (Jones, Reference Jones1981) and ordinary activities (Casal Bértoa and Rama, Reference Casal Bértoa and Rama2022), may reduce polarization. This is because publicly funded parties have incentives to pursue the public interest, rather than the preferences of their donors, which tend to be more ideologically extreme (Bafumi and Herron, Reference Bafumi and Herron2010; Barber, Reference Barber2016; Bonica, Reference Bonica2013; Tomashevskiy, Reference Tomashevskiy2022). As most public funding regimes reward parties based on their electoral support, political parties have an incentive to shape policy platforms toward the normative preferences of voters located at the centre of the political spectrum (Baron, Reference Baron1994). This suggests that public subsidies may have a moderating effect on ideological polarization. Ultimately, though the impact of DPF at the party system has been widely examined, the lack of studies in continents such as Oceania and, particularly Asia, where the diversity in DPF usage is beneficial for cross-national comparisons is problematic (Mobrand et al., Reference Mobrand, Bértoa and Hamada2019). Thus, there exists scope for further study which accounts for global differences in party systems.

Public funding and gender representation

One of the traditional justifications for DPF lies in its potential to increase competition between parties. Building on this egalitarian foundation, a strand of research investigates how subsidies may equalize opportunities within parties. These studies focus on the impact of public funding on underrepresented demographics; primarily female candidates, who face unique pressures at each stage of the electoral process (Ballington and Kahane, Reference Ballington, Kahane, Falguera, Jones and Ohman2014; Tovar-Restrepo, Reference Tovar-Restrepo2009). These pressures, which reflect “patriarchal social practices that see women as less qualified, less equipped, and less willing to participate in politics” Feo and Piccio (Reference Feo and Piccio2020: 904), relate to societal roles, systemic economic disparities, and institutional design. In a survey of 272 parliamentarians in 110 countries, Ballington (Reference Ballington2008: 18) found “domestic responsibilities” to be the strongest deterrent to females entering politics. Tovar-Restrepo (Reference Tovar-Restrepo2009: 41) concurs, observing that “the cost of childcare imposes an unequal burden on many women seeking elected office.” Where female candidates do not have responsibilities in these areas, economic concerns provide a major hurdle to navigate, as systemic factors routinely put women at a disadvantage. Labour market inequalities discourage participation, as female candidates run a higher risk of “leaving their jobs and [not] being able to re-enter the labour market should they not be elected” (Tovar-Restrepo Reference Tovar-Restrepo2009: 38). Moreover, gender-based disparities in socio-economic terms mean that women often “lack the economic independence to pursue a political career” (Ballington and Kahane, Reference Ballington, Kahane, Falguera, Jones and Ohman2014: 304).

Early money in campaigns is crucial, as a strong foundation provides the politically ambitious with the impetus to solicit further donations and mount a long-lasting campaign. With early resources generally coming from self-financing, however, candidates face barriers from the outset; this effect is amplified for women who, on average, hold fewer assets than men (Ballington and Kahane, Reference Ballington, Kahane, Falguera, Jones and Ohman2014; Tovar-Restrepo, Reference Tovar-Restrepo2009). Compounding this, research shows a gendered dimension to political donations, with individuals tending to contribute to candidates who share their gender identity (Tolley et al., Reference Tolley, Besco and Sevi2022). Socio-economic inequalities mean that male donors may have a greater level of disposable wealth to contribute, further exacerbating funding discrepancies. Extending this relationship further, research from an intersectional perspective identifies that women of colour are significantly underrepresented in campaign finance (Grumbach et al., Reference Grumbach, Sahn and Staszak2022; Sorensen and Chen, Reference Sorensen and Chen2022; Wylie, Reference Wylie2020). Finally, institutional design has implications for the abilities of female candidates to contend for office. In majoritarian systems with single-member districts, women may struggle to raise funds, as “men are traditionally perceived to project strength, aggressiveness, and the ability to win that is perceived as necessary in the zero-sum majoritarian race” (Cigane and Ohman, Reference Cigane and Ohman2014: 16).

Following the 1979 Convention on the Elimination of All Forms of Discrimination against Women, almost 40% of the world’s countries now implement gender-targeted DPF (International IDEA, 2022). A recent trend investigates the influence of subsidies in promoting gender equality (Wylie, Reference Wylie2020). Strategies may earmark a proportion of funding to promote gender equality or, alternatively, may determine eligibility or allocation rates upon gender representation (Ohman, Reference Ohman2018). Implemented through “payments or penalties,” approaches are grouped into two themes; namely rewards for parties that promote female representation, and punishments for those that do not (Muriaas et al. Reference Muriaas, Mazur and Hoard2022: 502). An illustrative example of punitive gender-targeted provisions comes from France where, since 1999, regulations permit electoral authorities to withhold a portion of subventions to parties that have a gender disparity of greater than 2% among candidates (Cigane and Ohman, Reference Cigane and Ohman2014). Conversely, parties in Chile are rewarded based on female representation, receiving subsidies of roughly US$20,000 for each female candidate successfully elected. Women also receive a higher rate reimbursement per vote gained, relative to male candidates (Piscopo et al., Reference Piscopo, Hinojosa, Thomas and Siavelis2022).

Although gender-targeted subsidies have increased in prominence, the question of whether these are effective cuts across current works in this area. While Muriaas et al. (Reference Muriaas, Mazur and Hoard2022: 513) observe that “using financial mechanisms to incentivize the selection of women candidates is a powerful tool for increasing access for the underrepresented in politics,” Piscopo et al. (Reference Piscopo, Hinojosa, Thomas and Siavelis2022: 222) conclude that “such schemes might be insufficient for equalizing campaign funding between men and women.” Some use subventions to fund leadership courses for women, for example, while others channel these funds into “the celebration of Mother’s Day and even the purchase of flowers for events” (Casas-Zamora and Falguera, Reference Casas-Zamora and Falguera2016: 29). Ohman (Reference Ohman2018) identifies three key factors that determine the probability of success in gender-related public funding. The first concerns the extent to which parties rely on public sources as a proportion of their overall income. Where party income is predominantly derived from private donations, changes in the public funding system are unlikely to have any meaningful impact. The second is connected to the strength of the linkage between subsidization and gender equality. Where the percentage of subventions earmarked for the development of female candidates is low, or guidance is poorly defined, positive outcomes are unlikely.Footnote ⁸ Finally, for provisions to have an impact, efforts must be made to “alter the incentive structure of party officials” towards the empowerment of women at all levels of the party organization (Ohman, Reference Ohman2018: 9).

This area of literature has significant potential for policy impact, by studying how DPF can be used to increase the political participation of underrepresented groups. While this is the case, large-N research is conspicuous by its absence. Further study from a global perspective would provide a greater understanding of the contexts within which gender-targeted DPF may, or may not, have a positive impact on the political representation.

Public funding and political corruption

Alongside goals linked to party competition, DPF is often justified as a means to reduce corruption. As this is the case, one of the largest bodies of literature on public funding studies the relationship between subsidy use and the prevalence of corruption. Whereas alternative dimensions of political finance regulation – namely controls on private income, campaign spending, transparency, oversight and enforcement – impose restrictions on parties, DPF is used to diminish party dependency on private funding (Alexander, Reference Alexander1989; Dawood, Reference Dawood2015; Nassmacher, Reference Nassmacher2009; Paltiel, Reference Paltiel, Butler, Penniman and Ranney1981). According to May (Reference May2025), DPF is more likely to receive public support when its ability to reduce party reliance on big donors is highlighted by policymakers. This perspective is endorsed by international organizations (van Biezen, Reference van Biezen2003; Council of Europe, 2003; OSCE/ODIHR and Venice Commission, 2020), who argue that subsidies can limit the capacity of special interest groups to buy influence through private contributions (Grossman and Helpman, Reference Grossman and Helpman2001). Accordingly, by providing DPF, the state can reduce the influence of vested interests, enabling political parties to prioritize public welfare over private agendas (Cagé, Reference Cagé2020). These expectations have two critical implications for the relationship between party financing and political corruption. First, they transgress the conventional definition of corruption as “the abuse of entrusted power for private gain” (Pope and Transparency International, 2000). Second, trading campaign contributions for political favours, although in many cases legal, may still significantly undermine the equality and representativeness of the democratic process. The standard approach to corruption, therefore, does not cover instances whereby a transaction can be labelled as corrupt regarding party financing.

A key distinction is that political funding obtained from corrupt transactions may not be consumed “for private gain but rather for the gain of a political party or of a candidate” (Pinto-Duschinsky Reference Pinto-Duschinsky2002: 71). It encompasses illegal donations, abuse of state resources for partisan purposes, rigging public tenders or vote-buying, among others. Moreover, party-related corruption might arise from other sources like political appointments of top bureaucratic positions to extract resources for personal and political purposes (Figueroa, Reference Figueroa2021; Gingerich, Reference Gingerich2013; Grzymała-Busse, Reference Grzymała-Busse2007; Sigman, Reference Sigman2022). These examples feed into several strands of corruption research, stretching beyond individual corruption. Although we do not engage in debate over various approaches to corruption manifestations – a task comprehensively performed by others (Dawood, Reference Dawood2014; Heidenheimer and Johnston, Reference Heidenheimer and Johnston2002; Philp and Dávid-Barrett, Reference Philp and Dávid-Barrett2015; Thompson, Reference Thompson2018) – it suffices to underscore that within the framework of institutional (Lessig, Reference Lessig2011; Thompson, Reference Thompson2013; Warren, Reference Warren2004), structural (Hellman et al., Reference Hellman, Jones and Daniel Kaufmann2000; Sandoval-Ballesteros, Reference Sandoval-Ballesteros2013) or legal corruption (Kaufmann and Vicente, Reference Kaufmann and Vicente2011), even legally-bounded political contributions entail the distortion of the democratic process and policymaking, thus justifying the provision of DPF.

Despite the risks entailed by private funding, critics of DPF argue that, as parties become more dependent on the state, funding streams of opposition parties become susceptible to manipulation by incumbents. Dependence on subsidies may also lead to increased perceptions of party corruption, due to the degradation of links between parties and civil society (van Biezen and Kopecký, Reference van Biezen and Kopecký2007; Mendilow and Rusciano, Reference Mendilow, Rusciano, Alexander and Nassmacher2001). Anecdotal case study evidence provides a mixed picture of the relationship between DPF and corruption (Butler, Reference Butler2010; Ewing and Issacharoff, Reference Ewing and Issacharoff2006; Falguera et al., Reference Falguera, Jones and Ohman2014; Malamud and Posada-Carbó, Reference Malamud and Posada-Carbó2005; Mendilow, Reference Mendilow2012; Mendilow and Phélippeau, Reference Mendilow and Phélippeau2018; Norris and van Es, Reference Norris and van Es2016; Smilov and Toplak, Reference Smilov and Toplak2007). While some show that public funding is likely to decrease the propensity for parties to engage in quid pro quo exchanges, others observe little to no impact. The increasing reliance of parties on the state, especially in new democracies, may have intensified parties’ appetite for illicit funding. This is particularly applicable to government parties, given their access to and exploitation of state resources (van Biezen and Kopecký, Reference van Biezen and Kopecký2001). As Fisher and Eisenstadt (Reference Fisher and Eisenstadt2004: 621) underscore, the provision of public funding to parties “has not succeeded in wholly eliminating corruption and loophole-seeking.”

This pessimistic view tends to be fuelled by the outbreak of party funding scandals across both established and emerging democracies. Events of this nature usually involve illicit contributions in exchange for various governmental favours. While reputational costs borne by parties involved in scandals vary across nations, evidence indicates that parties in Western democracies may continue to seek illicit forms of funding, even when DPF is available to them. Scandals in nations such as Italy (Pujas and Rhodes, Reference Pujas and Rhodes1999), Germany (Scarrow, Reference Scarrow2003), Austria (Oltermann, Reference Oltermann2019; Transparency International, 2019), Spain (Edwards, Reference Edwards2019; Jimenez and Villoria, Reference Jimenez, Villoria, Mendilow and Phélippeau2018), France (François and Phélippeau, Reference François, Phélippeau, Mendilow and Phélippeau2018) and Great Britain (Fisher, Reference Fisher and Williams2000) display the vulnerabilities of political parties under the pressure of monied interests. In some cases they represent the tip of the iceberg of a potentially broader network of “hidden exchanges” (Della Porta and Vannucci, Reference Della Porta and Vannucci2012), casting doubts over the purifying effect of DPF on the political process. Scepticism is reinforced by scandals in some of the cleanest polities, including those in the Nordic region. The reputation of Finnish, Danish and Swedish parties was tarnished by scandals related to undisclosed corporate funding (Financial Times, 2008), hidden influence of business clubs due to the lack of transparency regarding private funding (Van Der Staak and Leterme, 2016), and the willingness to circumvent transparency obligations by accepting anonymous donations (The Local Sweden, 2022). These examples raise justified concerns over DPF’s effectiveness in preventing corruption, since political parties in these countries benefit from generous support from the state (Reed et al., Reference Reed, Stonestreet and Devrim2021).

Besides, anti-party sentiment can be fuelled when state funding is misused or abused by its beneficiaries. Italy’s case is emblematic again as the allocation system has enabled widespread misuse by allowing parties to obtain campaign reimbursements unrelated to actual costs, receive funds after dissolutions or mergers, secure reimbursements without reaching the eligibility threshold through opportunistic legal interpretations, and forming temporary electoral cartels (Pacini, Reference Pacini2009: 186–199). Similarly, in France, the DPF system has been exploited due to regulatory loopholes. The legal framework has encouraged the creation of numerous “micro-parties,” which often acted as personal financial machines for politicians to obtain easy access to subsidies rather than act as genuine political organizations. (François and Phélippeau, Reference François, Phélippeau, Mendilow and Phélippeau2018: 278–279). High-profile financial scandals further highlight systemic flaws, revealing opaque accounting practices, overspending, and overcharging for services to divert public reimbursements, malfeasance enabled by an oversight body with insufficient investigative authority (ibid: 274–275, 280). Romania represents another example where mainstream parties have channelled over 257 million lei (€52 million) of state subsidies between 2021 and 2023 (non-electoral years) into buying favourable coverage across major television and online outlets without labelling it as political advertising, while keeping contracted beneficiaries undisclosed (Andrei, Reference Andrei2024), and also while the PSD’s treasurer was sentenced to five years for embezzling €380k of state subsidies to buy real estate (Pǎcurar, Reference Pǎcurar2021). Similar or graver practices can be found across both established and emerging democracies, thus discrediting the purpose of DPF in sustaining party democratic development.

Nevertheless, although “subsidies are not necessarily an antidote to financial dependence on private sources […] and, even less, to unsavoury fundraising practices” (Casas-Zamora Reference Casas-Zamora2005: 39), many believe that DPF can free parties from the burden of continuous fundraising and a heavy dependence on private donors (Bryan and Baer, Reference Bryan and Baer2005; Fischer et al., Reference Fischer, Walecki and Carlson2006). In Japan, for instance, Carlson (Reference Carlson, Norris and van Es2016) observes that, despite the increased frequency of scandals related to the misuse of public money – due to enhancements in disclosure regulation – the provision of subsidies played a major role in reducing corruption. Conversely, in Indonesia, the decrease of state subsidization in 2005 contributed to increased reliance on illicit funding. This reduction also facilitated the penetration of politics by oligarchs, who switched from indirect involvement, by supporting political parties, to direct engagement, by creating their own political machines (Mietzner, Reference Mietzner2007, Reference Mietzner2015). While case studies offer some insights into the relationship between public funding and corruption, country-based evidence raises questions linked to external validity.

Yet, similar to case study research, large-N studies provide contrasting results on the public funding-corruption relationship. Evertsson (Reference Evertsson2013) finds that the availability of DPF is associated with lower corruption, for example, but her results are statistically insignificant. Likewise, (Norris, Reference Norris2017) observes that neither public funding nor donation and spending caps deter corruption and improve electoral integrity. Further negative results are obtained by studies that apply longitudinal analyses. Using panel data models, a composite political finance regulation index, and two-decades of corruption trends (1996–2015) in 18 Latin American countries, Lopez et al. (Reference Lopez, Rodríguez and Valentini2017) find that an increase in regulations is associated with a weaker control of corruption. They further notice that an increase in political finance regulation is likely to reduce corruption only under a highly independent judiciary (Lopez et al., Reference Lopez, Rodríguez and Valentini2017). Additionally, relying on two alternative corruption risk indices in public procurement built from 2.3 million public contracts in 27 EU countries, Fazekas and Cingolani (Reference Fazekas and Cingolani2017) find that more regulations correlate with higher corruption risks in public procurement. Casal Bértoa et al. (2014a) arrive at similar conclusions after estimating the impact of various regulations on corruption. Contrary to the expectation that a higher dependency on the state lowers corruption, they observe trends in the opposing direction. Thus, they conclude that a very close intertwining between parties and the state may be perceived by citizens as an increased capacity to extract rents through public tenders, governmental favouritism and patronage.

Despite these discouraging findings, the hopes of public funding advocates and promoters are sustained by more optimistic results. Using alternative corruption measures, Kostadinova (Reference Kostadinova2012) identifies a negative correlation between the availability of party subsidies and corruption. Similarly, by employing a composite index of public funding, Ben-Bassat and Dahan (Reference Ben-Bassat and Dahan2015) find that a higher public funding score is negatively associated with corruption, although their results do not reach statistical significance across all model specifications. In the most comprehensive study in terms of geographical and temporal coverage (175 countries, 1900-2015), Hummel et al. (Reference Hummel, Gerring and Burt2021) test the effect of DPF on corruption by using a composite index of DPF and panel data estimations. They find a negative relationship and conclude that “subsidies reduce corruption by displacing bribes and embezzlement” (Hummel et al. Reference Hummel, Gerring and Burt2021: 18). Finally, using DPF data per vote across 27 post-communist polities (1990-2020) and a corruption proxy representing the impact of informal payments to political parties on business performance using firm-level data, Lipcean and McMenamin (Reference Lipcean and McMenamin2024) conclude that more generous subsidies are associated with a lower share of firms heavily affected by illicit party funding. While their results proved sensitive to model specification, an increase of DPF up to four dollars per vote, the amount required to reach statistical significance, was associated with a decline in corruption by 12% (ibid: 18-19). Their results were even stronger when accounting for the lagged effect of DPF, suggesting “that changes in the amount of public funding take approximately one parliamentary and/or presidential term to feed through into corruption” (ibid: 17).

The heterogeneity of research findings on the linkage between public subsidies and corruption leaves open the debate regarding the direction and strength of this relationship; much of this is driven by the use of different corruption measures. Most research surveyed here uses Transparency International’s Corruption Perception Index (CPI) or World Bank’s Control of Corruption (CoC) indicator, which are generic indices that do not specifically capture party-related corruption. Other research employs alternative measures, including the V-DEM political corruption index (Hummel et al., Reference Hummel, Gerring and Burt2021), corruption risks in public procurement (Fazekas and Cingolani, Reference Fazekas and Cingolani2017), citizens’ perception of party corruption – Global Corruption Barometer (Casal Bértoa et al. 2014a) and business community opinions (Lipcean and McMenamin, Reference Lipcean and McMenamin2024), which measure rather different things. Yet, while composite indices are heavily criticized (Thomas, Reference Thomas2010; Thompson and Shah, Reference Thompson and Shah2005), some voices assert that the differences between expert and citizens’ opinions, as well as between corruption perception and experience, are overstated (Charron, Reference Charron2016). Likewise, Fazekas and Cingolani (Reference Fazekas and Cingolani2017) find that their corruption risk indicators in public procurement, based on objective data, correlate relatively highly with four alternative measures: CoC, CPI, Eurobarometer, and the Global Competitiveness Index. These results suggest that discrepancies between corruption perception indices and experience-based or other proxies based on hard data should not be as problematic to use in comparative research on party funding.

Nevertheless, this overview reveals several limitations of the DPF–corruption research, among which the lack of consensus on how to define and measure corruption is paramount. This leads to inconsistency of findings in comparative studies, which highlights the complexity of the relationship, pointing to context-dependency (Lipcean and Casal Bértoa, Reference Lipcean and Casal Bértoa2024b). Methodological limitations, including regional biases in data and the challenge of isolating DPF’s impact from other institutional factors, further weaken the generalisability of findings. These gaps suggest the need for more nuanced, context-sensitive approaches and party-oriented corruption measures to better assess DPF’s role in curbing corruption. As we show next, similar issues have emerged regarding approaches used to measure variation in DPF.

Challenges in the operationalization of DPF

Inconsistent findings represent a key feature across the aforementioned research areas. This inconsistency is driven by the absence of cross-national public funding indicators, leading to research dominated by within-nation case studies. While comparative studies have grown in prominence in recent years, scholars have commonly relied on different proxy measures to account for variation in DPF, which fuelled this inconsistencyFootnote ⁹ Common methodological approaches include the operationalization of public funding as a dichotomous indicator (i.e., absence vs. presence of subsidies), or as an aggregated public funding index that incorporates both direct and indirect forms of state subsidization (van Biezen, Reference van Biezen, LeDuc, Niemi and Norris2010; Evertsson, Reference Evertsson2013). Beyond this, however, numerous studies incorporate public funding mechanisms within indicators that measure wider areas of political finance regulation. Horncastle (Reference Horncastle2022a) undertakes a review of these approaches, identifying two categories: mono- and multi-dimensional. Most mono-dimensional indicators are constructed through additive approaches, where the researcher adds the number of regulations in all areas of political finance – including public funding – to produce a measure of regulatory stringency (van Biezen and Rashkova, Reference van Biezen and Rashkova2014; Lopez et al., Reference Lopez, Rodríguez and Valentini2017; Potter and Tavits, Reference Potter and Tavits2015; Rashkova and Su, Reference Rashkova and Su2020; Whiteley, Reference Whiteley2011, Reference Whiteley2014). While these tools provide an overview of the differences between regulatory practice, Horncastle (Reference Horncastle2022a: 2) notes that indices constructed in this way “rely on a previously untested assumption that the addition of individual regulations provides an identical impact on the overall restrictiveness of a country’s political finance system.”

To account for these issues, van Es (Reference van Es, Norris and van Es2016) and Horncastle (Reference Horncastle2022a) use dimension-reduction techniques for weighting different regulations. The “Political Finance Regulation Index” of van Es (Reference van Es, Norris and van Es2016) uses Bayesian factor analysis to weight subcategories of regulation – including contribution limits, spending limits, reporting and disclosure, and public funding – into a measure of “state interventionism” in party finance (van Es Reference van Es, Norris and van Es2016: 210). In Horncastle’s case, the “Regulation of Political Finance Indicator” uses multiple correspondence analysis to produce a continuous indicator of regulation, and subsequently implements a model-based clustering algorithm to group 180 nations into three system types: Unregulated, Partially Regulated, and Strongly Regulated (Horncastle, Reference Horncastle2022b). Paulissen and Horncastle (Reference Paulissen and Horncastle2024) apply a similar methodology to regulations on referendum campaigns. In each of these examples, DPF is incorporated within the wider system of political finance regulation. Multi-dimensional conceptions of political finance view public funding as an independent aspect of the financing regime. Examples include van Biezen’s (2010) “Typology of Financing Regimes,” which separate indices into dimensions of private funding, public funding, and disclosure, or Wiltse et al.’s (Reference Wiltse, La Raja and Apollonio2019) classification based on the degree of state intervention in regulating income and transparency dimensions of political financing regimes.

More recently, regulatory-based proxies have been complemented by expert assessments on the significance of, and access to, DPF. Several questions from the V-DEM Project and Electoral Integrity Project address these issues (Coppedge et al., Reference Coppedge, Gerring and Henrik2024; Garnett et al., Reference Garnett, James and Caal-Lam2024; Global Integrity, 2014). However, as Lipcean (Reference Lipcean2022) shows, expert scores perform rather poorly against actual data on public funding and regulation-based indicators.Footnote ¹⁰ Moreover, Scarrow (2011: 13) notes that indicators solely capture the “regulatory breadth” and not the intensity of state intervention or regulatory stringency.Footnote ¹¹ The aggregation of scores of different dimensions in a single measure representing the overall degree of state intervention, as in van Es (Reference van Es, Norris and van Es2016), might be counterproductive for making inferences on the effects of political finance regulation, in general, and DPF in particular. Specific aspects of the regulatory system may interact differently with varied institutional features of political systems, for instance, reducing numerous regulatory dimensions into a single measure may lead to substantial information loss. In the case of public funding, crucial information relating to the subsidy level is excluded. However, higher subsidy levels (direct and indirect) reflect an increased state support and more favourable conditions for political parties. For Casal Bértoa et al. (Reference Casal Bértoa, Molenaar, Piccio and Rashkova2014a), the degree of state intervention is represented by the state dependency rate, which represents the share of public funding in the structure of party income. This approach is also embraced by the creators of the Political Party Database (Poguntke, Scarrow and Webb, Reference Poguntke, Scarrow and Webb2016; Poguntke, Scarrow, Webb, et al., Reference Poguntke, Scarrow and Webb2016; Scarrow et al., Reference Scarrow, Webb and Poguntke2022), where the share of public funding in the structure of party income is measured at party-level, thus allowing to construct country-level aggregates for cross-national comparisons. For Lipcean and McMenamin (Reference Lipcean and McMenamin2024), it reflects the actual country-level amount of public funding per vote employed to assess the effect of DPF on corruption. This is a more valid measure of state assistance to parties since it represents the benchmark measure based on which other indicators are constructed, such as the state dependency rate. Nevertheless, despite the significance of DPF in the study of party competition and corruption, most comparative research relies on weak proxies that poorly capture the fine-grained nature of political finance regulation or the DPF mechanism.

Future directions for public funding research

This article has reviewed the literature on public funding of political parties, focussing on the effects that subsidization has on electoral competition, party systems, political parties, gender representation, and political corruption. Through undertaking this exercise, we identify clear findings which provide insights into best practices for policymakers. In particular, we suggest that DPF should: (i) not be provided at such a level to create a financial dependency on the state; (ii) not be distributed exclusively after elections, and; (iii) not be limited only to parliamentary parties, else DPF will fail to achieve its purported aims. While we provide these recommendations, some questions remain unanswered by the extant literature. Recognizing these limits as an opportunity for further research, we conclude by presenting a series of proposals for future scholars of public funding.

One of the common threads within the literature is that very little is known about the consequences of indirect public funding. While there are few works on the impact that free or subsidized media access have on party competition and strategies, even less is known about the effects of other types of indirect public funding (e.g., tax exemptions, free or subsidized postage costs and/or transport, free or subsidized premises/space for campaign meetings/materials, etc.). Issues outside of election-related funding also warrant further investigation, with little comparative research being undertaken in relation to allowances allocated to elected representatives, their staffing/offices, and fulfilling parliamentary functions. Such resourcing is variable across cases and over time, and DPF is just a small portion of the public resources committed to the functioning of parties and government. As in the case of DPF, research examining indirect public funding, like media access, either incorporates the availability of free or subsidized media into composite indices (Potter and Tavits, Reference Potter and Tavits2015), employs access to media as a binary indicator (Hino, Reference Hino2012) or looks into the evolution of media access rules without assessing its effects or determinants (Loomes, Reference Loomes2013). Likewise, little is known about other measures such as tax deductions, which are commonly considered as a tool to increase political participation through private contributions. While earlier work examining the weight of different sources in party income regarded tax deductions as a positive feature of regulations, designed to boost grassroots financing and consolidate party-voter relations (Nassmacher, Reference Nassmacher2009: 370; Nassmacher and Nassmacher, Reference Nassmacher, Nassmacher, Alexander and Nassmacher2001: 184–185), more recent studies claim that tax deductions skew policy towards the interests of the wealthy, since only they have the resources to contribute to political activities (Cagé, Reference Cagé2020: 2–3). Accordingly, the investigation of both determinants and potential effects of indirect funding present important research avenues.

The second area of further investigation concerns how DPF can be used as a means to overcome issues of representation. At present, a growing body of literature focusses on this issue from a gendered perspective (Muriaas et al., Reference Muriaas, Mazur and Hoard2022; Piscopo et al., Reference Piscopo, Hinojosa, Thomas and Siavelis2022; Wylie, Reference Wylie2020). With the increasing prevalence of gender-targeted public funding around the world, additional research should analyse how different types of gendered-targeted public funding (e.g., earmarking, access to public funding, allocation of extra funds, loss/suspension of state subsidies, etc.) work in practice. Additional literature should examine party responses to these mechanisms (including potential avoidance strategies) and whether financial implications are a sufficient motivation for parties to take action on gender inequality. Moreover, additional research is sought to assess whether subsidies may be used to promote the participation of wider demographics, such as ethnic minority groups, persons with disabilities, and LGBTQ+ communities. The prioritization of studies of this nature would provide a springboard upon which to build more representative forms of public funding and political finance regulation.

Considering that “public funding of parties cannot be seen in isolation from the wider aspects of political finance regulation” (Orr Reference Orr, Mendilow J and Phélippeau2018: 97), the third proposal is that future scholarship should look into the potential interaction effects of public and private funding regulations, expenditure controls and, especially, oversight functions. Similarly, while some studies find that state subsidies can increase parties’ social rootedness or combat corruption, this effect might only be observed when DPF is combined with an independent, powerful, and well-resourced oversight authority. Additionally, research should dig deeper into the features contained within the overall public funding mechanism. Researchers should explore the potential synergy and interaction between different elements of the public funding scheme: levels of public funding, payout threshold, allocation formula and timing of disbursement. This is particularly relevant since heretofore comparative research has focused on just a single element. In most cases, either the availability of (as a dichotomous indicator) or access to subsidies (payout threshold) have been employed to investigate the effects of DPF. Accordingly, the subsidy level, allocation formula, and timing of disbursement have scarcely been employed to investigate the effects of DPF in comparative literature. Interaction between these factors is essential to understand their impact on political competition at party and system levels. If generous and widespread public funding is provided pre-election, for instance, DPF might help small parties cope better with electoral costs, make them electorally more competitive, and increase their survival odds. Likewise, such a scheme might affect the party system configuration since it would incentivise the emergence and success of new parties, which in turn could alter the structure of party competition. Conversely, if subsidies are disbursed post-election as a reimbursement of expenses, such a mechanism may advantage established parties and pose higher entry costs to potential challengers.

Research avenues outlined above bring us to a fourth critical issue in public funding research, the shortage of valid and reliable indicators of DPF. Although most of these indicators, including access and allocation rules, as well as timing for campaign funding disbursement, are readily available as regulations built into party and electoral laws, we still lack systematic time-series data suitable for longitudinal analyses. Longitudinal data is critical to overcome the pitfalls of cross-sectional data and, accordingly, to draw policy-relevant inferences regarding the money-politics relationship. The situation is more complex with data on public funding amount, which requires significantly more effort to collect and standardize. While such data are currently more accessible for a broader pool of countries, the variation in the method determining the subsidy level, as well as language barriers, requires collective efforts for data gathering and harmonization. This challenge is highlighted by the authors of the Political Party Database who note that, despite the widening obligation to publish party financial reports, “there are big differences in the amount of information that parties must or do provide” (Scarrow and Webb, 2017: 11). Given data shortages, most comparative research focuses on advanced democracies. Although there are recent attempts to fill this gap for other regions, such as post-communist regimes (Lipcean, Reference Lipcean2022), political finance scholars have limited geographical and temporal coverage of DPF data. Accordingly, political financing scholars must expand their geographical and temporal coverage. The implications for this present oversight are clear; with very few exceptions (Butler, Reference Butler2010; Sachsenröder, Reference Sachsenröder2018; Sanches, Reference Sanches2018), little is known about the consequences of DPF in both Africa and Asia.

Finally, we believe that more effort could be made to study the processes behind the passing of laws and partisan construction of DPF systems. Future research may examine the potential benefits that incumbent parties or coalitions ascribe to DPF and how such expectations may shift as constraints and competitive dynamics change over time. Studies of this nature would provide useful insights to explain how and why DPF systems are introduced, amended, and repealed. Though some research has been published on this topic (Horncastle, Reference Horncastle2025; Koß, Reference Koß2010; Nwokora, Reference Nwokora2014), our understanding would be enhanced considerably should the types of data discussed in the previous paragraph become available in future.

Despite inconsistent findings, there is a belief among politicians and practitioners that DPF can, at least partially, reduce parties’ dependence on private donors and mitigate corruption. However, it is crucial to carefully consider the potential consequences and limitations of public funding, as well as the need for ongoing research to better understand this intricate relationship. While public funding holds the promise of reducing political corruption and strengthening democratic representation, its effectiveness and impact remain subject to ongoing debate and empirical investigation, reflecting the complexity of the relationship between money in politics and the integrity of democratic processes. Building on this review, future research in these key areas will deepen our knowledge of the consequences of public funding.