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Warm glow, information, and inefficient charitable giving

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  • Null, C.

Abstract

More than 200 donors participated in a framed field experiment which consisted of a series of decisions about how to divide a gift between a set of similar charities. Most subjects simultaneously gave to multiple charities with similar missions even when the social benefit of gifts to different charities were not equal, as proxied by the matching rates applied to subjects' gifts. Taking each subject's preferences over the set of charities as given, these choices resulted in substantial inefficiencies: subjects forfeited social surplus (matching funds) equal to 25% of the value of their gifts. Suggestive evidence indicates that warm glow utility derived from the act of making a gift, which can lead to a love of variety even among similar charities, and risk aversion over the social value of charitable gifts are both important factors motivating donors who make socially inefficient gifts. Additionally, few subjects were willing to pay for information that could have enabled them to increase the social benefit of their gifts, although many of these subjects also forfeited potential personal gains in an investment decision, casting some doubt on this interpretation. The possibility that the personal value of information might not be equal to the social value might help explain why there are so few rigorous evaluations of aid programs: such evaluations are costly to charities and might not be valued by donors.

Suggested Citation

  • Null, C., 2011. "Warm glow, information, and inefficient charitable giving," Journal of Public Economics, Elsevier, vol. 95(5-6), pages 455-465, June.
  • Handle: RePEc:eee:pubeco:v:95:y:2011:i:5-6:p:455-465
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Stephen Knowles & Maroš Servátka, 2014. "Transaction costs, the Opportunity Cost of Time and Inertia in Charitable Giving:," Working Papers 1401, University of Otago, Department of Economics, revised Jan 2014.
    2. Alexander L. Brown & Jonathan Meer & J. Forrest Williams, 2013. "Why Do People Volunteer? An Experimental Analysis of Preferences for Time Donations," NBER Working Papers 19066, National Bureau of Economic Research, Inc.
    3. repec:bla:ecinqu:v:55:y:2017:i:1:p:409-424 is not listed on IDEAS
    4. repec:eee:jeborg:v:136:y:2017:i:c:p:45-62 is not listed on IDEAS
    5. 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).
    6. Lilley, Andrew & Slonim, Robert, 2014. "The price of warm glow," Journal of Public Economics, Elsevier, vol. 114(C), pages 58-74.
    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. Karlan, Dean & Wood, Daniel H., 2017. "The effect of effectiveness: Donor response to aid effectiveness in a direct mail fundraising experiment," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 66(C), pages 1-8.
    9. 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.
    10. Braaten, Ragnhild Haugli, 2014. "Testing deontological warm glow motivation for carbon abatements," Resource and Energy Economics, Elsevier, vol. 38(C), pages 96-109.
    11. David Fielding & Stephen Knowles & Kirsten Robertson, 2017. "When does it matter how you ask? Cross-subject heterogeneity in framing effects in a charitable donation experiment," Working Papers 1701, University of Otago, Department of Economics, revised Jan 2017.
    12. 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.
    13. repec:bla:ecorec:v:93:y:2017:i:302:p:420-433 is not listed on IDEAS

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