Rational Inattention to Subsidies for Charitable Contributions
AbstractRecent evidence suggests that individuals do not always take notice of tax attributes when making their choices. This paper focuses on the case of tax relief for charitable contributions. Although a fully rational donor should view a matched payment to the receiving charity and a tax rebate of the same value as being fully equivalent, evidence from a survey shows that nominal donations are significantly more likely to adjust in response to a change in the tax rebate than to a corresponding change in the match. The patterns of responses across different donors that emerge from the survey cannot be readily explained by the presence of administrative costs or differential warm-glow effects, nor from the match being a more "shrouded" attribute in comparison with the rebate. Rather, we argue that these patterns are consistent with the predictions of a model of rational inattention, whereby a majority of individuals deliberately choose to process changes in the rebate while forgoing to process changes in the match.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 7760.
Date of creation: Mar 2010
Date of revision:
Contact details of provider:
Postal: Centre for Economic Policy Research, 77 Bastwick Street, London EC1V 3PZ
Phone: 44 - 20 - 7183 8801
Fax: 44 - 20 - 7183 8820
Other versions of this item:
- Scharf, Kim; Smith, Sarah, 2010. "Rational Inattention to Subsidies for Charitable Contributions," CAGE Online Working Paper Series 02, Competitive Advantage in the Global Economy (CAGE).
- Kimberly Scharf & Sarah Smith, 2011. "Rational Inattention to Subsidies for Charitable Contributions," The Centre for Market and Public Organisation 11/269, Department of Economics, University of Bristol, UK.
- D0 - Microeconomics - - General
- D8 - Microeconomics - - Information, Knowledge, and Uncertainty
- H2 - Public Economics - - Taxation, Subsidies, and Revenue
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Xavier Gabaix & David Laibson, 2006.
"Shrouded Attributes, Consumer Myopia, and Information Suppression in Competitive Markets,"
The Quarterly Journal of Economics,
MIT Press, vol. 121(2), pages 505-540, May.
- Xavier Gabaix & David Laibson, 2005. "Shrouded Attributes, Consumer Myopia, and Information Suppression in Competitive Markets," NBER Working Papers 11755, National Bureau of Economic Research, Inc.
- Gabaix, Xavier & Laibson, David I., 2006. "Shrouded Attributes, Consumer Myopia, and Information Suppression in Competitive Markets," Scholarly Articles 4554333, Harvard University Department of Economics.
- Andreoni,J. & Payne,A.A., 2001.
"Government grants to private charities : do they crowd out giving or fundraising?,"
19, Wisconsin Madison - Social Systems.
- James Andreoni & A Abigail Payne, 2001. "Government Grants to Private Charities: Do They Crowd-Out Giving or Fundraising?," Public Economics 0111001, EconWPA.
- Dean Karlan & John A. List, 2007.
"Does Price Matter in Charitable Giving? Evidence from a Large-Scale Natural Field Experiment,"
American Economic Review,
American Economic Association, vol. 97(5), pages 1774-1793, December.
- Dean Karlan & John A. List, 2006. "Does Price Matter in Charitable Giving? Evidence From a Large-Scale Natural Field Experiment," NBER Working Papers 12338, National Bureau of Economic Research, Inc.
- Karlan, Dean & List, John, 2006. "Does Price Matter in Charitable Giving? Evidence from a Large-Scale Natural Field Experiment," Working Papers 13, Yale University, Department of Economics.
- Dean Karlan & John List, 2006. "Does price matter in charitable giving? Evidence from a large-scale natural field experiment," Natural Field Experiments 00279, The Field Experiments Website.
- Dean Karlan & John A. List, 2006. "Does Price Matter in Charitable Giving? Evidence from a Large-Scale Natural Field Experiment," Working Papers 1, The Field Experiments Website.
- Catherine Eckel & Philip Grossman, 2008. "Subsidizing charitable contributions: a natural field experiment comparing matching and rebate subsidies," Experimental Economics, Springer, vol. 11(3), pages 234-252, September.
- Raj Chetty & Adam Looney & Kory Kroft, 2009.
"Salience and taxation: theory and evidence,"
Finance and Economics Discussion Series
2009-11, Board of Governors of the Federal Reserve System (U.S.).
- Eckel, Catherine C. & Grossman, Philip J., 2003. "Rebate versus matching: does how we subsidize charitable contributions matter?," Journal of Public Economics, Elsevier, vol. 87(3-4), pages 681-701, March.
- Douglas D. Davis & Edward L. Millner, 2004.
"Rebates, Matches, and Consumer Behavior,"
0401, VCU School of Business, Department of Economics.
- Johansson-Stenman Olof & Svedsäter Henrik, 2008. "Measuring Hypothetical Bias in Choice Experiments: The Importance of Cognitive Consistency," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 8(1), pages 1-10, September.
- Jennifer Brown & Tanjim Hossain & John Morgan, 2010. "Shrouded Attributes and Information Suppression: Evidence from the Field," The Quarterly Journal of Economics, MIT Press, vol. 125(2), pages 859-876, May.
- John List & David Reiley, 2008.
Artefactual Field Experiments
00091, The Field Experiments Website.
- Charles T. Clotfelter, 1985. "Federal Tax Policy and Charitable Giving," NBER Books, National Bureau of Economic Research, Inc, number clot85-1.
- Jon Bakija & Bradley Heim, 2008. "How Does Charitable Giving Respond to Incentives and Income? Dynamic Panel Estimates Accounting for Predictable Changes in Taxation," NBER Working Papers 14237, National Bureau of Economic Research, Inc.
- Clotfelter, Charles T., 1985. "Federal Tax Policy and Charitable Giving," National Bureau of Economic Research Books, University of Chicago Press, edition 1, number 9780226110486, July.
- Sarah Smith, 2012.
"Increasing Charitable Giving: What Can We Learn from Economics?,"
Institute for Fiscal Studies, vol. 33(4), pages 449-466, December.
- Sarah Smith, 2012. "Increasing charitable giving – what can we learn from economics?," The Centre for Market and Public Organisation 12/291, Department of Economics, University of Bristol, UK.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ().
If references are entirely missing, you can add them using this form.