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On the Crowding-Out Effects of Tax-Financed Charitable Contributions by the Government

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  • Alan Krause

Abstract

An important question in the literature on charitable contributions is the extent to which tax-financed contributions by the government crowd out private contributions. This paper examines a simple model of charitable contributions in which there exist both warm-glow and public good motives for giving, but where the warm-glow motive is competitive in the sense that individuals evaluate their own contribution relative to that of their peers. It is shown that the competitive element of the warm-glow motive may exacerbate or attenuate the crowding-out effect, depending upon certain preference and income parameters. However, as the warm-glow motive for giving becomes purely competitive, crowding out is exacerbated and is almost dollar-for-dollar.

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File URL: http://www.york.ac.uk/media/economics/documents/discussionpapers/2011/1101.pdf
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Bibliographic Info

Paper provided by Department of Economics, University of York in its series Discussion Papers with number 11/01.

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Date of creation: Jan 2011
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Handle: RePEc:yor:yorken:11/01

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Keywords: Charitable contributions; warm-glow; crowding out; public goods;

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Cited by:
  1. Daniel M. Hungerman, 2014. "Public Goods, Hidden Income, and Tax Evasion: Some Nonstandard Results from the Warm-Glow Model," NBER Working Papers 19804, National Bureau of Economic Research, Inc.

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