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Crowd-out and diversity

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  • Hungerman, Daniel M.

Abstract

Research has shown that altruism is lower in diverse communities. Can this phenomenon be counteracted by government intervention? To answer this question, this paper introduces diversity to the canonical model of "warm glow" giving. Diversity may have two effects on incentives: it may attenuate individuals' altruistic preferences for public goods, and it may "cool off" the warm glow that individuals get from voluntarism. Either of these effects leads to diverse communities having lower levels of public goods, consistent with prior research. However, these effects have opposite implications for the efficacy of government intervention. I then empirically investigate whether government intervention is more effective in diverse communities. For identification, I exploit the Supreme Court-mandated 1991 expansion of the SSI program. Using a new dataset of United Methodist churches from 1984 to 2000, the results show that the expansion of SSI crowded-out charitable spending by churches. The crowd-out estimate for the average church is reasonably large, but this masks significant differences in crowd-out between communities. Crowd-out occurred almost entirely in relatively homogeneous communities; there is only modest evidence of crowd-out in racially diverse communities. Thus diverse communities, while having the lowest levels of altruism, are in this instance the most amenable to government intervention.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Public Economics.

Volume (Year): 93 (2009)
Issue (Month): 5-6 (June)
Pages: 729-740

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Handle: RePEc:eee:pubeco:v:93:y:2009:i:5-6:p:729-740

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Web page: http://www.elsevier.com/locate/inca/505578

Related research

Keywords: Crowd out Religion Diversity;

References

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Citations

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Cited by:
  1. Ronen Bar-El & Teresa García-Muñoz & Shoshana Neuman & Yossef Tobol, 2013. "The evolution of secularization: cultural transmission, religion and fertility—theory, simulations and evidence," Journal of Population Economics, Springer, vol. 26(3), pages 1129-1174, July.
  2. Daniel M. Hungerman, 2014. "Public Goods, Hidden Income, and Tax Evasion: Some Nonstandard Results from the Warm-Glow Model," NBER Working Papers 19804, National Bureau of Economic Research, Inc.
  3. Adam D. Rennhoff & Mark F. Owens, 2010. "Competition and the Strategic Choices of Churches," Working Papers 201011, Middle Tennessee State University, Department of Economics and Finance.
  4. Michael D. Makowsky, 2010. "A Theory of Liberal Churches," Working Papers 2010-04, Towson University, Department of Economics, revised Feb 2010.
  5. Harrison, Teresa & Laincz, Chris, 2013. "Nonprofits, Crowd-Out, and Credit Constraints," School of Economics Working Paper Series 2013-5, LeBow College of Business, Drexel University.
  6. Ager, Philipp & Ciccone, Antonio, 2014. "Rainfall Risk and Religious Membership in the Late Nineteenth-Century United States," Working Papers 14-20, University of Mannheim, Department of Economics.
  7. James Andreoni & Abigail Payne & Justin D. Smith & David Karp, 2011. "Diversity and Donations: The Effect of Religious and Ethnic Diversity on Charitable Giving," NBER Working Papers 17618, National Bureau of Economic Research, Inc.
  8. James Andreoni & Abigail Payne & Justin Smith & David Karp, . "Diversity and Donations: The Effect of Religious and Ethnic Diversity on Charitable GivingAbstract: Using 10-year neighborhood-level panels derived from personal tax records in Canada, we find that lo," The Centre for Market and Public Organisation 12/289, Department of Economics, University of Bristol, UK.
  9. Raphaël Franck & Laurence Iannaccone, 2014. "Religious decline in the 20th century West: testing alternative explanations," Public Choice, Springer, vol. 159(3), pages 385-414, June.
  10. Paul Bingley & Ian Walker, 2013. "There’s no such thing as a free lunch: evidence of altruism and agency from household expenditure responses to child nutrition programs," Review of Economics of the Household, Springer, vol. 11(3), pages 371-392, September.
  11. Gronberg, Timothy J. & Luccasen, R. Andrew & Turocy, Theodore L. & Van Huyck, John B., 2012. "Are tax-financed contributions to a public good completely crowded-out? Experimental evidence," Journal of Public Economics, Elsevier, vol. 96(7-8), pages 596-603.
  12. repec:lan:wpaper:615522 is not listed on IDEAS
  13. R. Isaac & Douglas Norton, 2013. "Endogenous institutions and the possibility of reverse crowding out," Public Choice, Springer, vol. 156(1), pages 253-284, July.

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