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Donating Time or Money: Are they Substitutes or Complements?

Author

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  • Bastian Hartmann
  • Martin Werding

Abstract

Decisions to donate time or money for charitable purposes are typically seen as make-or-buy decisions, implying that there should be a clear distinction between individuals engaging in one of these two forms of giving and that this distinction should be somehow linked to opportunity costs. But this is not at all what we observe in micro-level data. We therefore suggest an alternative explanation by which time and cash donations are complements rather than substitutes. Assuming that there is asymmetric information about charities’ activities and their effectiveness, doing volunteer work may serve as a screening mechanism enabling donors to better assess the use that is made of the money they could contribute. We formalize this idea and, building on the European Social Survey (ESS), we also provide empirical evidence regarding the co-variation of volunteering and donating money which is suited to support our view.

Suggested Citation

  • Bastian Hartmann & Martin Werding, 2012. "Donating Time or Money: Are they Substitutes or Complements?," CESifo Working Paper Series 3835, CESifo Group Munich.
  • Handle: RePEc:ces:ceswps:_3835
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    File URL: http://www.cesifo-group.de/DocDL/cesifo1_wp3835.pdf
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    References listed on IDEAS

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    1. Dokko, Jane K., 2009. "Does the NEA Crowd Out Private Charitable Contributions to the Arts?," National Tax Journal, National Tax Association;National Tax Journal, vol. 62(1), pages 57-75, March.
    2. Karlan, Dean & List, Jonathan A., 2012. "How Can Bill and Melinda Gates Increase Other People's Donations to Fund Public Goods?," Working Papers 101, Yale University, Department of Economics.
    3. Naomi E. Feldman, 2010. "Time Is Money: Choosing between Charitable Activities," American Economic Journal: Economic Policy, American Economic Association, vol. 2(1), pages 103-130, February.
    4. John List & Michael Price, 2012. "Charitable Giving Around the World: Thoughts on How to Expand the Pie," Natural Field Experiments 00470, The Field Experiments Website.
    5. Kathleen Day & Rose Annue Devlin, 1998. "The Payoff to Work without Pay: Volunteer Work as an Investment in Human Capital," Canadian Journal of Economics, Canadian Economics Association, vol. 31(5), pages 1179-1191, November.
    6. Brown, Eleanor & Lankford, Hamilton, 1992. "Gifts of money and gifts of time estimating the effects of tax prices and available time," Journal of Public Economics, Elsevier, vol. 47(3), pages 321-341, April.
    7. Kathleen M. Day & Rose Anne Devlin, 1996. "Volunteerism and Crowding Out: Canadian Econometric Evidence," Canadian Journal of Economics, Canadian Economics Association, vol. 29(1), pages 37-53, February.
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      Keywords

      charities; cash donations; volunteer work; asymmetric information; screening; empirical evidence;

      JEL classification:

      • D64 - Microeconomics - - Welfare Economics - - - Altruism; Philanthropy; Intergenerational Transfers
      • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
      • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply
      • L31 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Nonprofit Institutions; NGOs; Social Entrepreneurship

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