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Are Tax Incentives for Charitable Giving Efficient? Evidence from France

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  • Gabrielle Fack
  • Camille Landais

Abstract

This paper estimates the effect of tax incentives for charitable contributions in France. We focus on two reforms that increased the nonrefundable tax credit rate for charitable contributions by 32 percent. We use a difference-in-difference identification, comparing the evolution of contributions for groups of households with similar income, but different taxable status due to differences in family size. We control for censoring issues and investigate distributional effects using a three-step censored quantile regression estimator. We find that the price elasticity of contributions is relatively small, but tends to increase with the level of gifts. (JEL D14, D64, H24)

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File URL: http://www.aeaweb.org/articles.php?doi=10.1257/pol.2.2.117
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Bibliographic Info

Article provided by American Economic Association in its journal American Economic Journal: Economic Policy.

Volume (Year): 2 (2010)
Issue (Month): 2 (May)
Pages: 117-41

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Handle: RePEc:aea:aejpol:v:2:y:2010:i:2:p:117-41

Note: DOI: 10.1257/pol.2.2.117
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References

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  1. Emmanuel Saez, 2000. "The Optimal Treatment of Tax Expenditures," NBER Working Papers 8037, National Bureau of Economic Research, Inc.
  2. Hong H. & Chernozhukov V., 2002. "Three-Step Censored Quantile Regression and Extramarital Affairs," Journal of the American Statistical Association, American Statistical Association, vol. 97, pages 872-882, September.
  3. Harbaugh, William T., 1998. "What do donations buy?: A model of philanthropy based on prestige and warm glow," Journal of Public Economics, Elsevier, vol. 67(2), pages 269-284, February.
  4. John A. List & David Lucking-Reiley, 2000. "The Effects of Seed Money and Refunds on Charitable Giving: Experimental Evidence from a University Capital Campaign," Vanderbilt University Department of Economics Working Papers 0008, Vanderbilt University Department of Economics.
  5. Marianne Bitler & Jonah Gelbach & Hilary Hoynes, 2003. "What Mean Impacts Miss: Distributional Effects of Welfare Reform Experiments," NBER Working Papers 10121, National Bureau of Economic Research, Inc.
  6. Kingma, Bruce Robert, 1989. "An Accurate Measurement of the Crowd-Out Effect, Income Effect, and Price Effect for Charitable Contributions," Journal of Political Economy, University of Chicago Press, vol. 97(5), pages 1197-1207, October.
  7. Huck, Steffen & Rasul, Imran & Shephard, Andrew, 2013. "Comparing Charitable Fundraising Schemes: Evidence from a Natural Field Experiment and a Structural Model," CEPR Discussion Papers 9648, C.E.P.R. Discussion Papers.
  8. Dean Karlan & John List, 2006. "Does price matter in charitable giving? Evidence from a large-scale natural field experiment," Natural Field Experiments 00279, The Field Experiments Website.
  9. Stephan Meier, 2006. "Do subsidies increase charitable giving in the long run?: matching donations in a field experiment," Working Papers 06-18, Federal Reserve Bank of Boston.
  10. Moshe Buchinsky & Jinyong Hahn, 1998. "An Alternative Estimator for the Censored Quantile Regression Model," Econometrica, Econometric Society, vol. 66(3), pages 653-672, May.
  11. Diamond, Peter, 2006. "Optimal tax treatment of private contributions for public goods with and without warm glow preferences," Journal of Public Economics, Elsevier, vol. 90(4-5), pages 897-919, May.
  12. Gerald E. Auten & Holger Sieg & Charles T. Clotfelter, 2002. "Charitable Giving, Income, and Taxes: An Analysis of Panel Data," American Economic Review, American Economic Association, vol. 92(1), pages 371-382, March.
  13. Randolph, William C, 1995. "Dynamic Income, Progressive Taxes, and the Timing of Charitable Contributions," Journal of Political Economy, University of Chicago Press, vol. 103(4), pages 709-38, August.
  14. Slemrod, Joel, 1989. "Are Estimated Tax Elasticities Really Just Tax Evasion Elasticities? The Case of Charitable Contributions," The Review of Economics and Statistics, MIT Press, vol. 71(3), pages 517-22, August.
  15. Marianne Bertrand & Esther Duflo & Sendhil Mullainathan, 2002. "How Much Should We Trust Differences-in-Differences Estimates?," NBER Working Papers 8841, National Bureau of Economic Research, Inc.
  16. Powell, James L., 1986. "Censored regression quantiles," Journal of Econometrics, Elsevier, vol. 32(1), pages 143-155, June.
  17. Boskin, Michael J & Feldstein, Martin S, 1977. "Effects of the Charitable Deduction on Contributions by Low Income and Middle Income Households: Evidence from the National Survey of Philanthropy," The Review of Economics and Statistics, MIT Press, vol. 59(3), pages 351-54, August.
  18. Bruno S. Frey & Stephan Meier, . "Social Comparisons and Pro-social Behavior - Testing ‘Conditional Cooperation’ in a Field Experiment," IEW - Working Papers 162, Institute for Empirical Research in Economics - University of Zurich.
  19. Jon Bakija, 2000. "Distinguishing Transitory and Permanent Price Elasticities of Charitable Giving with Pre-Announced Changes in Tax Law," Department of Economics Working Papers 2000-06, Department of Economics, Williams College.
  20. Jon Bakija & Bradley Heim, 2008. "How Does Charitable Giving Respond to Incentives and Income? Dynamic Panel Estimates Accounting for Predictable Changes in Taxation," NBER Working Papers 14237, National Bureau of Economic Research, Inc.
  21. Eckel, Catherine C. & Grossman, Philip J., 2003. "Rebate versus matching: does how we subsidize charitable contributions matter?," Journal of Public Economics, Elsevier, vol. 87(3-4), pages 681-701, March.
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Citations

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Cited by:
  1. Bönke, Timm & Massarrat-Mashhadi, Nima & Sielaff, Christian, 2010. "Charitable giving in the German welfare state: Fiscal incentives and crowding out," Discussion Papers 2010/30, Free University Berlin, School of Business & Economics.
  2. Mandar Oak & Anand Swamy, 2010. "Commitment and Conquest: The Case of British Rule in India," Department of Economics Working Papers 2010-08, Department of Economics, Williams College.
  3. Gabrielle Fack & Camille Landais, 2013. "The effect of tax enforcement on tax elasticities: Evidence from charitable contributions in France," Economics Working Papers 1406, Department of Economics and Business, Universitat Pompeu Fabra.
  4. Huck, Steffen & Rasul, Imran & Shephard, Andrew, 2013. "Comparing charitable fundraising schemes: Evidence from a natural field experiment and a structural model," Discussion Papers, Research Unit: Economics of Change SP II 2012-303r, Social Science Research Center Berlin (WZB).
  5. Adena, Maja, 2014. "Tax-price elasticity of charitable donations: Evidence from the German taxpayer panel," Discussion Papers, Research Unit: Economics of Change SP II 2014-302, Social Science Research Center Berlin (WZB).
  6. Tom Coupe & Claire Monteiro, 2013. "The Charity of the Extremely Wealthy," Discussion Papers 51, Kyiv School of Economics.
  7. Michael Berlemann & Marc-André Luik, 2014. "Institutional Reform and Depositors' Portfolio Choice - Evidence from Censored Quantile Regressions," CESifo Working Paper Series 4782, CESifo Group Munich.
  8. repec:dgr:uvatin:2009015 is not listed on IDEAS

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