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Impure Prosocial Motivation in Charity Provision: Warm-Glow Charities and Implications for Public Funding

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  • Kimberley Ann Scharf

Abstract

We show that warm-glow motives in provision by competing suppliers can lead to inefficient charity selection. In these situations, discretionary donor choices can promote efficient charity selection even when provision outcomes are non-verifiable. Government funding arrangements, on the other hand, face verification constraints that make them less flexible relative to private donations. Switching from direct grants to government subsidies for private donations can thus produce a positive pro-competitive effect on charity selection, raising the value of charity provision per dollar of funding.

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Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 4479.

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Date of creation: 2013
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Handle: RePEc:ces:ceswps:_4479

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Keywords: private provision of public goods; warm glow; tax incentives for giving; competition in the nonprofit sector;

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  1. Feldstein, Martin & Clotfelter, Charles, 1976. "Tax incentives and charitable contributions in the United States : A microeconometric analysis," Journal of Public Economics, Elsevier, vol. 5(1-2), pages 1-26.
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  17. Scharf, Kimberley Ann, 2000. "Why are tax expenditures for giving embodied in fiscal constitutions?," Journal of Public Economics, Elsevier, vol. 75(3), pages 365-387, March.
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