The effects of campaign expenditures on voting outcomes are of interest to both economists and political scientists. The dataset VOTE.DTA contains data for 173 two-party races for the U.S. House of Representatives in 1988. The variable voteD contains the percentage of votes received by the Democratic candidate. Expenditures by the two candidates (in thousands of dollars) are given by expendR and expendD. The variable prtystrD measures the Democratic party's general strength in the district as a percentage of the 1988 Presidential vote in that district that went to the Democratic candidate.

(a) Estimate the relationship between voting outcomes and expenditures using an appropriate econometric model. Provide an argument supporting the model and estimator that you use (as well as standard errors). How effective are campaign expenditures in explaining voting (interpret your results)?

(b) Is campaign spending an important determinant of vote shares? Explain.

(c) Does an equal increase in spending in a campaign (by both candidates) favor Democrats, favor Republicans, or have no effect? How strong is this result statistically? Does this conclusion affect your choice of econometric model?

(d) Is an additional $1, 000 of campaign spending by Democrats on Congressional races more effective at increasing the Democratic share of the vote in districts that tend to vote Democratic (based on Presidential voting)?