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(Un)Informed Charitable Giving

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  • Silvana Krasteva
  • Huseyin Yildirim
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    Abstract

    Evidence suggests that donors have little demand for information before giving to charity. To understand this behavior and its policy implications, we present a model in which each individual can acquire costly information about her true value of charity. We observe that an individual who considers giving less is less likely to become informed; and indeed, an uninformed donor is, on average, less generous than an informed one. This implies that since the free-rider problem in giving worsens in a larger population, the percentage of informed givers becomes vanishingly small, leaving the total expected donations strictly below its highest level to be reached by a fully informed population. We show that while a direct government grant to the charity causes severe crowding-out by discouraging information acquisition, a matching grant increases donations by encouraging it. We further show that a “warm-glow” motive for giving does not necessarily weaken incentives to be informed, and that a (first-order) stochastic increase in true values for charity may actually decrease donations.

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    Bibliographic Info

    Paper provided by Duke University, Department of Economics in its series Working Papers with number 11-26.

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    Length: 31
    Date of creation: 2011
    Date of revision:
    Handle: RePEc:duk:dukeec:11-26

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    Postal: Department of Economics Duke University 213 Social Sciences Building Box 90097 Durham, NC 27708-0097
    Phone: (919) 660-1800
    Fax: (919) 684-8974
    Web page: http://econ.duke.edu/

    Related research

    Keywords: charitable giving; search cost; value of information; crowding-out; warm-glow;

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