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Truth in giving: Experimental evidence on the welfare effects of informed giving to the poor

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  • M. Fong, Christina
  • Oberholzer-Gee, Felix

Abstract

It is often difficult for donors to predict the value of charitable giving because they know little about their recipients. This concern is particularly acute when making contributions to organizations that serve heterogeneous populations. Prior research shows that donors are more generous if they know their assistance benefits a group they like. But we know little about the demand for such information. To start closing this gap, we study transfers of income to real-world poor people in dictator games. Our dictators can purchase signals about why the recipients are poor. We find that a third of the dictators are willing to pay money to learn more about their recipient. Dictators who acquire information mostly use it to withhold resources from less-preferred types, leading to a drastic decline in aggregate transfers. With endogenous information about recipients, we find that all types of poor recipients are worse off.

Suggested Citation

  • M. Fong, Christina & Oberholzer-Gee, Felix, 2011. "Truth in giving: Experimental evidence on the welfare effects of informed giving to the poor," Journal of Public Economics, Elsevier, vol. 95(5-6), pages 436-444, June.
  • Handle: RePEc:eee:pubeco:v:95:y:2011:i:5-6:p:436-444
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    Cited by:

    1. Krasteva, Silvana & Yildirim, Huseyin, 2013. "(Un)Informed charitable giving," Journal of Public Economics, Elsevier, vol. 106(C), pages 14-26.
    2. Krasteva, Silvana & Yildirim, Huseyin, 2016. "Information, competition, and the quality of charities," Journal of Public Economics, Elsevier, vol. 144(C), pages 64-77.
    3. Peters, Jörg & Langbein, Jörg & Roberts, Gareth, 2016. "Policy evaluation, randomized controlled trials, and external validity—A systematic review," Economics Letters, Elsevier, vol. 147(C), pages 51-54.
    4. Sera Linardi & Nita Rudra, 2015. "Globalization and Redistribution Towards the Poor in Developing Countries: Experimental Evidence from India," Artefactual Field Experiments 00399, The Field Experiments Website.
    5. Kajackaite, Agne, 2015. "If I close my eyes, nobody will get hurt: The effect of ignorance on performance in a real-effort experiment," Journal of Economic Behavior & Organization, Elsevier, vol. 116(C), pages 518-524.
    6. Kim, Youngwan & Nunnenkamp, Peter & Bagchi, Chandreyee, 2014. "Natural disasters and private donations to NGOs: The effects of being present after the Tsunami in the Indian Ocean," Kiel Working Papers 1890, Kiel Institute for the World Economy (IfW).
    7. Laura Metzger & Isabel Günther, 2015. "Making an impact? The relevance of information on aid effectiveness for charitable giving. A laboratory experiment," Courant Research Centre: Poverty, Equity and Growth - Discussion Papers 182, Courant Research Centre PEG.
    8. Renate Buijze & Christoph Engel & Sigrid Hemels, 2015. "Insuring Your Donation – An Experiment," Discussion Paper Series of the Max Planck Institute for Research on Collective Goods 2015_16, Max Planck Institute for Research on Collective Goods, revised Jul 2016.
    9. Reinstein, David, 2014. "The Economics of the Gift," Economics Discussion Papers 10009, University of Essex, Department of Economics.
    10. Alberto Montagnoli & Mirko Moro & Robert Wright, 2016. "Financial literacy and attitudes to redistribution," Working Papers 1605, University of Strathclyde Business School, Department of Economics.
    11. David Chavanne & Kevin A. McCabe & Maria Pia Paganelli, 2015. "Are Self-Made Men Made Equally? An Experimental Test of Impartial Redistribution and Perceptions of Self-Determination," Nordic Journal of Political Economy, Nordic Journal of Political Economy, vol. 40, pages 1-3.
    12. repec:eee:jeeman:v:84:y:2017:i:c:p:209-222 is not listed on IDEAS
    13. Chiu, Leslie J. Verteramo & Gomez, Miguel I. & Liaukonyte, Jura & Kaiser, Harry M., 2015. "Socially Responsible Products: What Motivates Consumers to Pay a Premium?," 2016 Allied Social Science Association (ASSA) Annual Meeting, January 3-5, 2016, San Francisco, California 212829, Agricultural and Applied Economics Association.
    14. Pedro Rey-Biel & Roman Sheremeta & Neslihan Uler, 2015. "When Income Depends on Performance and Luck: The Effects of Culture and Information on Giving," Working Papers 15-12, Chapman University, Economic Science Institute.
    15. Pfarr, Christian & Schmid, Andreas & Mørkbak, Morten Raun, 2015. "Latent characteristics and preferences for income redistribution," Annual Conference 2015 (Muenster): Economic Development - Theory and Policy 113001, Verein für Socialpolitik / German Economic Association.
    16. Metzger, Laura, 2015. "Making an impact? The importance of aid effectiveness for charitable giving. A laboratory experiment," Annual Conference 2015 (Muenster): Economic Development - Theory and Policy 112835, Verein für Socialpolitik / German Economic Association.
    17. Christoph Engel & Sebastian Goerg, 2015. "If the Worst Comes to the Worst. Dictator Giving When Recipient’s Endowments are Risky," Discussion Paper Series of the Max Planck Institute for Research on Collective Goods 2015_15, Max Planck Institute for Research on Collective Goods.
    18. Krasteva, Silvana & Yildirim, Huseyin, 2014. "Reprint of: (Un)Informed charitable giving," Journal of Public Economics, Elsevier, vol. 114(C), pages 108-120.
    19. repec:bla:ecorec:v:93:y:2017:i:302:p:420-433 is not listed on IDEAS
    20. repec:eee:pubeco:v:155:y:2017:i:c:p:1-10 is not listed on IDEAS
    21. Pfarr, Christian & Schmid, Andreas & Mørkbak, Morten Raun, 2014. "Identifying latent interest-groups: An analysis of heterogeneous preferences for income-redistribution," MPRA Paper 58823, University Library of Munich, Germany.
    22. Christine L. Exley & Ragan Petrie, 2016. "The Impact of a Surprise Donation Ask," Harvard Business School Working Papers 16-101, Harvard Business School, revised Dec 2017.

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