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The price elasticity of charitable giving: does the form of tax relief matter?

  • Kim Scharf
  • Sarah Smith


This paper uses a survey-based approach to test alternative methods of channeling tax relief to donors – as a tax rebate for the donor or as a matched payment to the receiving charity. On accounting grounds these two are equivalent but, in line with earlier experimental studies, we find that gross donations are significantly more responsive to a match change than to a rebate change. We show that the difference can largely be explained by the fact that a majority of donors do not adjust their nominal donations in response to a change in subsidy. This evidence adds to the growing empirical literature suggesting that consumers may not react to tax changes. In the case of tax subsidies for donations, this has implications for policy design – we show for the UK that a match-based system is likely to be more effective at increasing the total amount of money going to charities.

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Paper provided by Department of Economics, University of Bristol, UK in its series The Centre for Market and Public Organisation with number 10/247.

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Length: 30 pages
Date of creation: Oct 2010
Date of revision:
Handle: RePEc:bri:cmpowp:10/247
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  4. Clotfelter, Charles T., 1985. "Federal Tax Policy and Charitable Giving," National Bureau of Economic Research Books, University of Chicago Press, edition 1, number 9780226110486.
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  8. Douglas D. Davis & Edward L. Millner, 2004. "Rebates, Matches, and Consumer Behavior," Working Papers 0401, VCU School of Business, Department of Economics.
  9. Raj Chetty & Adam Looney & Kory Kroft, 2009. "Salience and taxation: theory and evidence," Finance and Economics Discussion Series 2009-11, Board of Governors of the Federal Reserve System (U.S.).
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  12. Andreoni, James, 1990. "Impure Altruism and Donations to Public Goods: A Theory of Warm-Glow Giving?," Economic Journal, Royal Economic Society, vol. 100(401), pages 464-77, June.
  13. Amy Finkelstein, 2007. "E-ZTax: Tax Salience and Tax Rates," NBER Working Papers 12924, National Bureau of Economic Research, Inc.
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  16. Blumenthal, Marsha & Kalambokidis, Laura & Turk, Alex, 2012. "Subsidizing Charitable Contributions With A Match Instead Of A Deduction: What Happens To Donations And Compliance?," National Tax Journal, National Tax Association, vol. 65(1), pages 91-116, March.
  17. Steffen Huck & Imran Rasul & Andrew Shephard, 2015. "Comparing Charitable Fundraising Schemes: Evidence from a Natural Field Experiment and a Structural Model," American Economic Journal: Economic Policy, American Economic Association, vol. 7(2), pages 326-69, May.
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  20. Scharf, Kimberley Ann, 2000. "Why are tax expenditures for giving embodied in fiscal constitutions?," Journal of Public Economics, Elsevier, vol. 75(3), pages 365-387, March.
  21. Catherine Eckel & Philip Grossman, 2008. "Subsidizing charitable contributions: a natural field experiment comparing matching and rebate subsidies," Experimental Economics, Springer, vol. 11(3), pages 234-252, September.
  22. Randolph, William C, 1995. "Dynamic Income, Progressive Taxes, and the Timing of Charitable Contributions," Journal of Political Economy, University of Chicago Press, vol. 103(4), pages 709-38, August.
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  25. Harrison, Glenn W. & Rutström, E. Elisabet, 2008. "Experimental Evidence on the Existence of Hypothetical Bias in Value Elicitation Methods," Handbook of Experimental Economics Results, Elsevier.
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  28. Eckel, Catherine C. & Grossman, Philip J., 2003. "Rebate versus matching: does how we subsidize charitable contributions matter?," Journal of Public Economics, Elsevier, vol. 87(3-4), pages 681-701, March.
  29. Harbaugh, William T, 1998. "The Prestige Motive for Making Charitable Transfers," American Economic Review, American Economic Association, vol. 88(2), pages 277-82, May.
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