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Charity ratings

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  • Baris Yoruk

Abstract

How do charitable donors respond to the third party ratings that signal the quality of charities? I investigate this question using a novel data set from Charity Navigator which provides quality ratings for 5400 charities. Since Charity Navigator prominently displays a charity¡¯s star rating which is assigned based on its overall rating, one can identify the causal impact of a one star increase in ratings on charitable contributions with a regression discontinuity framework that exploits the threshold values of the overall ratings. I find that in general, the third party ratings have a minor and often insignificant impact on charitable contributions received by charities. However, for relatively smaller and unknown charities, a higher rating leads to an increase in charitable contributions received. In particular, for these charities, I find that a one star increase in ratings is associated with a 19.5 percent increase in the amount of charitable contributions received. This result is robust under alternative model specifications and highlights the role of the third party ratings in not-for-profit markets.

Suggested Citation

  • Baris Yoruk, 2013. "Charity ratings," Discussion Papers 13-05, University at Albany, SUNY, Department of Economics.
  • Handle: RePEc:nya:albaec:13-05
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    Cited by:

    1. Meer, Jonathan, 2014. "Effects of the price of charitable giving: Evidence from an online crowdfunding platform," Journal of Economic Behavior & Organization, Elsevier, vol. 103(C), pages 113-124.
    2. Brown, Alexander L. & Meer, Jonathan & Williams, J. Forrest, 2017. "Social distance and quality ratings in charity choice," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 66(C), pages 9-15.
    3. Laura E. Grant, 2021. "Does the introduction of ratings reduce giving? Evidence from charities," Economic Inquiry, Western Economic Association International, vol. 59(3), pages 978-995, July.

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