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How Can Bill and Melinda Gates Increase Other People’s Donations to Fund Public Goods?

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  • Dean Karlan

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  • John A List

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Abstract

A simple theory is developed which formally describes how charities can resolve the information asymmetry problems faced by small donors by working with large donors to generate quality signals. To test the model, two large-scale natural field experiments were conducted. In the first experiment, a charity focusing on poverty reduction solicited donations from prior donors and either announced a matching grant from the Bill and Melinda Gates Foundation, or made no mention of a match. In the second field experiment, the same charity sent direct mail solicitations to individuals who had not previously donated to the charity, and tested whether naming the Bill and Melinda Gates Foundation as the matching donor was more effective than not identifying the name of the matching donor. The first experiment demonstrates that the matching grant condition generates more and larger donations relative to no match. The second experiment shows that providing a credible quality signal by identifying the matching donor generates even more and larger donations than not naming the matching donor. Importantly, the treatment effects persist long after the matching period, and the quality signal is quite heterogeneous—the Gates’ effect is much larger for prospective donors who had a record of giving to “poverty-oriented” charities. These two pieces of evidence support the model of quality signals as a key mechanism through which matching gifts inspire donors to give. [BREAD Working Paper No. 332]. URL:[http://ipl.econ.duke.edu/bread/papers/working/332.pdf].

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Bibliographic Info

Paper provided by eSocialSciences in its series Working Papers with number id:4880.

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Date of creation: Mar 2012
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Handle: RePEc:ess:wpaper:id:4880

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Related research

Keywords: public goods; charitable fundraising; asymmetric information; matching grant; donors; donations; poverty; charity; Gross Domestic Product; average revenue; consumption; tax;

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References

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  1. 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.
  2. Gerald E. Auten & Holger Sieg & Charles T. Clotfelter, 2002. "Charitable Giving, Income, and Taxes: An Analysis of Panel Data," American Economic Review, American Economic Association, vol. 92(1), pages 371-382, March.
  3. James Andreoni, 2006. "Leadership Giving in Charitable Fund-Raising," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 8(1), pages 1-22, 01.
  4. Craig Landry & Andreas Lange & John List & Michael Price & Nicholas Rupp, 2006. "Toward an understanding of the economics of charity: Evidence from a field experiment," Natural Field Experiments 00292, The Field Experiments Website.
  5. Karlan, Dean & List, John A. & Shafir, Eldar, 2011. "Small matches and charitable giving: Evidence from a natural field experiment," Journal of Public Economics, Elsevier, vol. 95(5), pages 344-350.
  6. 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.
  7. Craig E. Landry & Andreas Lange & John A. List & Michael K. Price & Nicholas G. Rupp, 2008. "Is a Donor in Hand Better than Two in the Bush? Evidence from a Natural Field Experiment," NBER Working Papers 14319, National Bureau of Economic Research, Inc.
  8. Dean Karlan & Margaret A. McConnell, 2012. "Hey Look at Me: The Effect of Giving Circles on Giving," Working Papers 1006, Economic Growth Center, Yale University.
  9. Glenn W. Harrison & John A. List, 2004. "Field Experiments," Journal of Economic Literature, American Economic Association, vol. 42(4), pages 1009-1055, December.
  10. John A. List, 2011. "The Market for Charitable Giving," Journal of Economic Perspectives, American Economic Association, vol. 25(2), pages 157-80, Spring.
  11. Stefano DellaVigna & John A. List & Ulrike Malmendier, 2012. "Testing for Altruism and Social Pressure in Charitable Giving," The Quarterly Journal of Economics, Oxford University Press, vol. 127(1), pages 1-56.
  12. Randolph, William C, 1995. "Dynamic Income, Progressive Taxes, and the Timing of Charitable Contributions," Journal of Political Economy, University of Chicago Press, vol. 103(4), pages 709-38, August.
  13. Stephan Meier, 2007. "Do Subsidies Increase Charitable Giving in the Long Run? Matching Donations in a Field Experiment," Journal of the European Economic Association, MIT Press, vol. 5(6), pages 1203-1222, December.
  14. Andreoni, James, 1989. "Giving with Impure Altruism: Applications to Charity and Ricardian Equivalence," Journal of Political Economy, University of Chicago Press, vol. 97(6), pages 1447-58, December.
  15. Andreoni, James, 1990. "Impure Altruism and Donations to Public Goods: A Theory of Warm-Glow Giving?," Economic Journal, Royal Economic Society, vol. 100(401), pages 464-77, June.
  16. repec:feb:artefa:0090 is not listed on IDEAS
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Blog mentions

As found by EconAcademics.org, the blog aggregator for Economics research:
  1. Named matching donor are best to elicit more donations
    by Economic Logician in Economic Logic on 2012-04-24 14:14:00
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Cited by:
  1. Huck, Steffen & Rasul, Imran & Shephard, Andrew, 2013. "Comparing charitable fundraising schemes: Evidence from a natural field experiment and a structural model," Discussion Papers, Research Unit: Economics of Change SP II 2012-303r, Social Science Research Center Berlin (WZB).
  2. Bastian Hartmann & Martin Werding, 2012. "Donating Time or Money: Are they Substitutes or Complements?," CESifo Working Paper Series 3835, CESifo Group Munich.

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