The price elasticity of charitable giving: does the form of tax relief matter?
AbstractThis paper uses a survey-based approach to test alternative methods of channeling tax relief to donors – as a tax rebate for the donor or as a matched payment to the receiving charity. On accounting grounds these two are equivalent but, in line with earlier experimental studies, we find that gross donations are significantly more responsive to a match change than to a rebate change. We show that the difference can largely be explained by the fact that a majority of donors do not adjust their nominal donations in response to a change in subsidy. This evidence adds to the growing empirical literature suggesting that consumers may not react to tax changes. In the case of tax subsidies for donations, this has implications for policy design – we show for the UK that a match-based system is likely to be more effective at increasing the total amount of money going to charities.
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Bibliographic InfoPaper provided by Department of Economics, University of Bristol, UK in its series The Centre for Market and Public Organisation with number 10/247.
Length: 30 pages
Date of creation: Oct 2010
Date of revision:
charitable giving; tax subsidies; price elasticity;
Other versions of this item:
- Kim Scharf & Sarah Smith, 2010. "The price elasticity of charitable giving: does the form of tax relief matter?," IFS Working Papers W10/07, Institute for Fiscal Studies.
- Scharf, Kim; Smith, Sarah, 2010. "The Price Elasticity of Charitable Giving:Does the Form of Tax Relief Matter?," CAGE Online Working Paper Series 03, Competitive Advantage in the Global Economy (CAGE).
- C99 - Mathematical and Quantitative Methods - - Design of Experiments - - - Other
- D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
- D64 - Microeconomics - - Welfare Economics - - - Altruism; Philanthropy
- H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies
- H31 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Household
- H41 - Public Economics - - Publicly Provided Goods - - - Public Goods
This paper has been announced in the following NEP Reports:
- NEP-ALL-2011-01-16 (All new papers)
- NEP-PBE-2011-01-16 (Public Economics)
- NEP-PUB-2011-01-16 (Public Finance)
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