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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. Michael D. Makowsky, 2010. "A Theory of Liberal Churches," Working Papers 2010-04, Towson University, Department of Economics, revised Feb 2010.
  2. 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.
  3. Ronen Bar-El & Teresa García-Muñoz & Shoshana Neuman & Yossef Tobol, 2010. "The Evolution of Secularization: Cultural Transmission, Religion and Fertility. Theory, Simulations and Evidence," Papers on Economics of Religion 10/03, Department of Economic Theory and Economic History of the University of Granada..
  4. Adam D. Rennhoff & Mark F. Owens, 2012. "Competition and the Strategic Choices of Churches," American Economic Journal: Microeconomics, American Economic Association, vol. 4(3), pages 152-70, August.
  5. R. Isaac & Douglas Norton, 2013. "Endogenous institutions and the possibility of reverse crowding out," Public Choice, Springer, vol. 156(1), pages 253-284, July.
  6. 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.
  7. repec:lan:wpaper:615522 is not listed on IDEAS
  8. 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.
  9. Timothy J. Gronberg & R. Andrew Luccasen & Theodore L. Turocy & John B. Van Huyck, 2012. "Are tax-financed contributions to a public good completely crowded-out? Experimental evidence," Working Paper series, University of East Anglia, Centre for Behavioural and Experimental Social Science (CBESS) 12-02, School of Economics, University of East Anglia, Norwich, UK..
  10. James Andreoni & A. Abigail Payne & Justin Smith & David Karp, 2013. "Diversity and Donations: The Effect of Religious and Ethnic Diversity on Charitable Giving," Department of Economics Working Papers 2013-11, McMaster University.
  11. 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.
  12. 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.

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