Giving to charity to signal smarts: evidence from a lab experiment

The literature on charitable giving suggests that individuals may use their charitable donations to signal their altruism or their income. We argue that, rather than signaling income per se, individuals may want to signal other unobservable characteristics that correlate to income, such as their intelligence. We designed a laboratory experiment to test this hypothesis. We assigned endowments to individuals who could spend all or part of those endowments on a charitable donation. We cross-randomized the visibility of donations and the individuals’ perceptions about the effect of intelligence on the allocation of endowments. We found that the effect of donation visibility on donation amounts depends sharply on whether the individuals perceive that endowments are determined by intelligence. This evidence suggests that, consistent with our hypothesis, subjects may engage in charitable giving to signal their smarts.