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Donating Time or Money: Are they Substitutes or Complements?

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  • Bastian Hartmann
  • Martin Werding

Abstract

Decisions to donate time or money for charitable purposes are typically seen as make-or-buy decisions, implying that there should be a clear distinction between individuals engaging in one of these two forms of giving and that this distinction should be somehow linked to opportunity costs. But this is not at all what we observe in micro-level data. We therefore suggest an alternative explanation by which time and cash donations are complements rather than substitutes. Assuming that there is asymmetric information about charities’ activities and their effectiveness, doing volunteer work may serve as a screening mechanism enabling donors to better assess the use that is made of the money they could contribute. We formalize this idea and, building on the European Social Survey (ESS), we also provide empirical evidence regarding the co-variation of volunteering and donating money which is suited to support our view.

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Bibliographic Info

Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 3835.

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Date of creation: 2012
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Handle: RePEc:ces:ceswps:_3835

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Related research

Keywords: charities; cash donations; volunteer work; asymmetric information; screening; empirical evidence;

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  1. Kathleen Day & Rose Annue Devlin, 1998. "The Payoff to Work without Pay: Volunteer Work as an Investment in Human Capital," Canadian Journal of Economics, Canadian Economics Association, Canadian Economics Association, vol. 31(5), pages 1179-1191, November.
  2. Dokko, Jane K., 2009. "Does the NEA Crowd Out Private Charitable Contributions to the Arts?," National Tax Journal, National Tax Association, vol. 62(1), pages 57-75, March.
  3. Dean Karlan & John A. List, 2012. "How Can Bill and Melinda Gates Increase Other People’s Donations to Fund Public Goods?," NBER Working Papers 17954, National Bureau of Economic Research, Inc.
  4. Naomi E. Feldman, 2010. "Time Is Money: Choosing between Charitable Activities," American Economic Journal: Economic Policy, American Economic Association, American Economic Association, vol. 2(1), pages 103-30, February.
  5. Kathleen M. Day & Rose Anne Devlin, 1996. "Volunteerism and Crowding Out: Canadian Econometric Evidence," Canadian Journal of Economics, Canadian Economics Association, Canadian Economics Association, vol. 29(1), pages 37-53, February.
  6. Brown, Eleanor & Lankford, Hamilton, 1992. "Gifts of money and gifts of time estimating the effects of tax prices and available time," Journal of Public Economics, Elsevier, Elsevier, vol. 47(3), pages 321-341, April.
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