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Joint Crowdout: An Empirical Study of the Impact of Federal Grants on State Government Expenditures and Charitable Donations

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Author Info
Lawrence B. Lindsey
Richard Steinberg

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Abstract

We estimate the effect of exogenous federal expenditure cutbacks on state social service expenditures and on charitable donations. In the process, we also estimate tax and income effects and explore the impact of community environment and "need" variables. Data consist of a unique three-year panel of aggregate itemized giving by state and income class and government expenditures by state. Our results confirm the 'flypaper effect' of federal grants on state spending and show statistically significant but partial crowdout of charitable donations. The flypaper effects appears to dominate the crowdout of donations, so that federal grants are especially productive of overall social service expenditures. Finally, we find that the state's poverty rate is a particularly strong and positive determinant of charitable giving.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 3226.

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Date of creation: Jan 1990
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Handle: RePEc:nbr:nberwo:3226

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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.:

  1. Bernheim, B Douglas, 1986. "On the Voluntary and Involuntary Provision of Public Goods," American Economic Review, American Economic Association, vol. 76(4), pages 789-93, September. [Downloadable!] (restricted)
  2. 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. [Downloadable!] (restricted)
  3. Moffitt, Robert A., 1984. "The effects of grants-in-aid on state and local expenditures : The case of AFDC," Journal of Public Economics, Elsevier, vol. 23(3), pages 279-305, April. [Downloadable!] (restricted)
  4. Roberts, Russell D, 1984. "A Positive Model of Private Charity and Public Transfers," Journal of Political Economy, University of Chicago Press, vol. 92(1), pages 136-48, February. [Downloadable!] (restricted)
  5. Hamilton, Bruce W., 1983. "The flypaper effect and other anomalies," Journal of Public Economics, Elsevier, vol. 22(3), pages 347-361, December. [Downloadable!] (restricted)
  6. Feldstein, Martin S & Taylor, Amy, 1976. "The Income Tax and Charitable Contributions," Econometrica, Econometric Society, vol. 44(6), pages 1201-22, November. [Downloadable!] (restricted)
  7. Bergstrom, Theodore & Blume, Lawrence & Varian, Hal, 1986. "On the private provision of public goods," Journal of Public Economics, Elsevier, vol. 29(1), pages 25-49, February. [Downloadable!] (restricted)
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  1. Thomas A. Garrett & Russell M. Rhine, 2007. "Does government spending really crowd out charitable contributions? new time series evidence," Working Papers 2007-012, Federal Reserve Bank of St. Louis. [Downloadable!]
  2. Francesca Borgonovi & Michael O'Hare, 2004. "The Impact of the National Endowment for the Arts in the United States: Institutional and Sectoral Effects on Private Funding," Journal of Cultural Economics, Springer, vol. 28(1), pages 21-36, February. [Downloadable!] (restricted)
  3. Cynthia Benzing & Thomas Andrews, 2004. "The effect of tax rates and uncertainty on contributory crowding out," Atlantic Economic Journal, International Atlantic Economic Society, vol. 32(3), pages 201-215, September. [Downloadable!] (restricted)
  4. Douglas Noonan, 2007. "Fiscal pressures, institutional context, and constituents: a dynamic model of states’ arts agency appropriations," Journal of Cultural Economics, Springer, vol. 31(4), pages 293-310, December. [Downloadable!] (restricted)
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