The price elasticity of charitable giving: New experimental evidence (original) (raw)
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The Price Elasticities of Charitable Contributions: AMeta-Analysis
2000
Tax deductibility has been recognized as a motive for charitable donations. The current paper considers charitable donations as purchases made by consumers and examines the effects of changes in the tax deductibility (i.e., the price of donating) on charitable donations. The meta-analysis includes almost four decades of estimates of the price elasticity of charitable giving. Implications for policymakers and the marketers of charities are discussed
ISRN Economics, 2012
The effectiveness of tax incentives on charitable donation expenditures in Canada is explored, and the analysis is extended to compare the effectiveness across different donation sectors. Price elasticities are estimated with data from the 2007 Canada Survey of Giving, Volunteering and Participating. Results suggest that specific charitable sectors are affected differently by Canada’s tax credit system. The findings have implications for public policy.
Experimental Economics, 2008
We report the results of a field experiment conducted in conjunction with a mailed fundraising campaign of a nonprofit organization. The experiment is designed to compare the response of donors to subsidies in the form of matching amounts or rebated amounts. Matching subsidies are used by many corporations as an employee benefit; the US federal tax system encourages giving using a rebate subsidy by making donations tax deductible. The design includes a control group and two levels of subsidy of each type. Our main result is that matching subsidies result in larger total donations to charities than rebate subsidies, a result that is qualitatively similar to the lab findings. The estimated price elasticities for the matching subsidy are very similar to (and insignificantly different from) the lab experiments, while rebate subsidies lead to lower contributions in the field than in the lab. Since rebates in the field involve substantial lags and additional complications as compared with the "instant rebates" of the lab, this latter difference is not unexpected. The matching results are an important step in validating lab estimates of responsiveness to subsidies of charitable giving.
Substitution Among Charitable Contributions: An Experimental Study
2010
Abstract The question of whether charitable gifts are complements or substitutes, and the extent to which charities are rivals, is unresolved in the economic literature. The answer is relevant to charities and policymakers, as well as to economic models of altruism. Identifying this using observational data is difficult: there is a lack of independent price variation and few observable shocks that can be claimed to specifically affect giving to one charity.
Errors in Variables and Estimated Price Elasticities for Charitable Giving
2003
Researchers often rely on self-reported tax data to gauge the effect of taxes on an economic activity. Such data are subject to measurement errors when individuals intentionally misreport their attributes for tax purposes. To the extent that these intentional reporting errors vary with the tax price and after-tax income, which are important regressors in tax price models, estimated elasticities may be biased. We examine the effect of intentional errors-in-variables in tax price models with an application to charitable giving. We employ a random sample of tax returns subject to extensive audits in order to gauge the magnitude of this potential bias. When the theoretically correct measures of the regressors are used the estimated price elasticity of giving is considerably larger, and the income elasticity is somewhat smaller than conventional estimates using self-reported data. We also find evidence of simultaneity between giving and unreported income. Then, we evaluate the efficacy o...
How sensitive is the average taxpayer to changes in the tax-price of giving?
International Tax and Public Finance, 2018
There is a substantial literature estimating the responsiveness of charitable donations to tax incentives for giving in the USA. One approach estimates the price elasticity of giving based on tax return data of individuals who itemize their deductions, a group substantially wealthier than the average taxpayer. Another estimates the price elasticity for the average taxpayer based on general population survey data. Broadly, results from both arms of the literature present a counterintuitive conclusion: the price elasticity of donations of the average taxpayer is larger than that of the average, wealthier, itemizer. We provide theoretical and empirical evidence that this conclusion results from a heretofore unrecognized downward bias in the estimator of the price elasticity of giving when non-itemizers are included in the estimation sample (generally with survey data). An intuitive modification to the standard model used in the literature is shown to yield a consistent and more efficient estimator of the price elasticity for the average taxpayer under a testable restriction. Strong empirical support is found for this restriction, and we estimate a bias in the price elasticity around − 1, suggesting the existing literature significantly overestimates (in absolute value) the price elasticity of giving. Our results provide evidence of an inelastic price elasticity for the average taxpayer, with a statistically significant and elastic price response found only for households in the top decile of income.
RePEc: Research Papers in Economics, 2006
This paper estimates and describes how a shock that increases an individual's donation to one cause tends to displace her gifts to other charitable causes, an effect I call "expenditure substitution." I use the 2001-2005 waves of the PSID/COPPS, the first data set of its kind. Households that give more to one type of charity tend to give more to others. However, many of the correlations between the residuals after fixed-effects regressions are negative and significant, particularly for larger donors and for certain categories of charitable giving. Given plausible econometric assumptions, the negative correlations are strong evidence of expenditure substitution.
Subsidizing Quantity Donations: Matches, Rebates, and Discounts Compared
AEA Randomized Controlled Trials, 2018
We present online-experimental evidence that challenges the generalizability of established results on subsidizing giving by considering a 'quantity donation' scheme. We define this scheme as one in which donors choose how many units of a charitable good to fund, rather than the amount of money to give. We find that different subsidy types are equally effective in raising funds. This contrasts with the common result of matches being superior to rebates. The finding masks a higher likelihood of giving under rebates and larger donations under matches and discounts. Our results emphasize the role of small changes in the donation environment.