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How Does Charitable Giving Respond to Incentives and Income? New Estimates From Panel Data

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  • Bakija, Jon
  • Heim, Bradley T.

Abstract

We estimate the elasticity of charitable giving with respect to persistent and transitory price and income changes using a 1979–2006 panel of tax returns. Our estimation procedure allows for anticipation of and gradual adjustment to tax changes, controls for various potential sources of omitted variable bias via fixed effects and income-class specific year dummies, and allows for a flexible non-linear relationship between income and charitable giving. Our most convincing estimates are identified by differences in the time-paths of tax incentives across states, and suggest a persistent price elasticity in excess of one in absolute value.

Suggested Citation

  • Bakija, Jon & Heim, Bradley T., 2011. "How Does Charitable Giving Respond to Incentives and Income? New Estimates From Panel Data," National Tax Journal, National Tax Association;National Tax Journal, vol. 64(2), pages 615-650, June.
  • Handle: RePEc:ntj:journl:v:64:y:2011:i:2:p:615-50
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    References listed on IDEAS

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    1. Auten, Gerald E. & Cilke, James M. & Randolph, William C., 1992. "The Effects of Tax Reform on Charitable Contributions," National Tax Journal, National Tax Association, vol. 45(3), pages 267-90, September.
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    6. Dean Karlan & John A. List, 2007. "Does Price Matter in Charitable Giving? Evidence from a Large-Scale Natural Field Experiment," American Economic Review, American Economic Association, vol. 97(5), pages 1774-1793, December.
    7. Jon Bakija & Robert McClelland, 2005. "Timing vs. Long-run Charitable Giving Behavior: Reconciling Divergent Approaches and Estimates," Department of Economics Working Papers 2005-08, Department of Economics, Williams College.
    8. Raj Chetty, 2012. "Bounds on Elasticities With Optimization Frictions: A Synthesis of Micro and Macro Evidence on Labor Supply," Econometrica, Econometric Society, vol. 80(3), pages 969-1018, May.
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    16. Burman, Leonard E. & Clausing, Kimberly A. & O'Hare, John F., 1994. "Tax Reform and Realizations of Capital Gains in 1986," National Tax Journal, National Tax Association, vol. 47(1), pages 1-18, March.
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    JEL classification:

    • H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies
    • H31 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Household
    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis

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