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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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File URL: http://www.bristol.ac.uk/cmpo/publications/papers/2010/wp247.pdf
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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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