IDEAS home Printed from https://ideas.repec.org/p/ces/ceswps/_4479.html

Impure Prosocial Motivation in Charity Provision: Warm-Glow Charities and Implications for Public Funding

Author

Listed:
  • Kimberley Ann Scharf

Abstract

We show that warm-glow motives in provision by competing suppliers can lead to inefficient charity selection. In these situations, discretionary donor choices can promote efficient charity selection even when provision outcomes are non-verifiable. Government funding arrangements, on the other hand, face verification constraints that make them less flexible relative to private donations. Switching from direct grants to government subsidies for private donations can thus produce a positive pro-competitive effect on charity selection, raising the value of charity provision per dollar of funding.

Suggested Citation

  • Kimberley Ann Scharf, 2013. "Impure Prosocial Motivation in Charity Provision: Warm-Glow Charities and Implications for Public Funding," CESifo Working Paper Series 4479, CESifo.
    • Handle: RePEc:ces:ceswps:_4479
    as

    Download full text from publisher

    File URL: https://www.ifo.de/DocDL/cesifo1_wp4479.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Jan Potters & Martin Sefton & Lise Vesterlund, 2007. "Leading-by-example and signaling in voluntary contribution games: an experimental study," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 33(1), pages 169-182, October.
    2. Henry Hansmann, 1981. "Nonprofit Enterprise in the Performing Arts," Bell Journal of Economics, The RAND Corporation, vol. 12(2), pages 341-361, Autumn.
    3. Andreoni,J. & Payne,A.A., 2001. "Government grants to private charities : do they crowd out giving or fundraising?," Working papers 19, Wisconsin Madison - Social Systems.
    4. Roberts, Russell D, 1987. "Financing Public Goods," Journal of Political Economy, University of Chicago Press, vol. 95(2), pages 420-437, April.
    5. Tomas J. Philipson & Richard A. Posner, 2009. "Antitrust in the Not-for-Profit Sector," Journal of Law and Economics, University of Chicago Press, vol. 52(1), pages 1-18, February.
    6. Saez, Emmanuel, 2004. "The optimal treatment of tax expenditures," Journal of Public Economics, Elsevier, vol. 88(12), pages 2657-2684, December.
    7. Henry Hansmann, 2012. "Ownership and Organizational Form [The Handbook of Organizational Economics]," Introductory Chapters,, Princeton University Press.
    8. Potters, Jan & Sefton, Martin & Vesterlund, Lise, 2005. "After you--endogenous sequencing in voluntary contribution games," Journal of Public Economics, Elsevier, vol. 89(8), pages 1399-1419, August.
    9. Robert Gibbons & John Roberts, 2012. "The Handbook of Organizational Economics," Economics Books, Princeton University Press, edition 1, volume 1, number 9889, December.
    10. Glaeser, Edward L. & Shleifer, Andrei, 2001. "Not-for-profit entrepreneurs," Journal of Public Economics, Elsevier, vol. 81(1), pages 99-115, July.
    11. Andreoni, James & Payne, A. Abigail, 2011. "Is crowding out due entirely to fundraising? Evidence from a panel of charities," Journal of Public Economics, Elsevier, vol. 95(5-6), pages 334-343, June.
    12. Vesterlund, Lise, 2003. "The informational value of sequential fundraising," Journal of Public Economics, Elsevier, vol. 87(3-4), pages 627-657, March.
    13. Clotfelter, Charles T., 1985. "Federal Tax Policy and Charitable Giving," National Bureau of Economic Research Books, University of Chicago Press, edition 1, number 9780226110486, October.
    14. Horstmann, Ignatius J. & Scharf, Kimberley & Slivinski, Al, 2007. "Can private giving promote economic segregation?," Journal of Public Economics, Elsevier, vol. 91(5-6), pages 1095-1118, June.
    15. Warr, Peter G., 1982. "Pareto optimal redistribution and private charity," Journal of Public Economics, Elsevier, vol. 19(1), pages 131-138, October.
    16. Andreoni, James, 1989. "Giving with Impure Altruism: Applications to Charity and Ricardian Equivalence," Journal of Political Economy, University of Chicago Press, vol. 97(6), pages 1447-1458, December.
    17. 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 464-477, June.
    18. Diamond, Peter, 2006. "Optimal tax treatment of private contributions for public goods with and without warm glow preferences," Journal of Public Economics, Elsevier, vol. 90(4-5), pages 897-919, May.
    19. 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.
    20. Feldstein, Martin & Clotfelter, Charles, 1976. "Tax incentives and charitable contributions in the United States : A microeconometric analysis," Journal of Public Economics, Elsevier, vol. 5(1-2), pages 1-26.
    21. Andreoni, James, 1988. "Privately provided public goods in a large economy: The limits of altruism," Journal of Public Economics, Elsevier, vol. 35(1), pages 57-73, February.
    22. Marc J. Melitz, 2003. "The Impact of Trade on Intra-Industry Reallocations and Aggregate Industry Productivity," Econometrica, Econometric Society, vol. 71(6), pages 1695-1725, November.
    23. James Andreoni & A. Abigail Payne, 2003. "Do Government Grants to Private Charities Crowd Out Giving or Fund-raising?," American Economic Review, American Economic Association, vol. 93(3), pages 792-812, June.
    24. Charles T. Clotfelter, 1985. "Federal Tax Policy and Charitable Giving," NBER Books, National Bureau of Economic Research, Inc, number clot85-1, October.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Scharf, Kimberley, 2010. "Public Funding of Charities and Competitive Charity Selection," CEPR Discussion Papers 7937, Centre for Economic Policy Research.
    2. James Andreoni & Abigail Payne, 2007. "Crowding out Both Sides of the Philanthropy Market: Evidence from a Panel of Charities," Levine's Bibliography 122247000000001769, UCLA Department of Economics.
    3. Andreoni, James & Payne, A. Abigail, 2011. "Is crowding out due entirely to fundraising? Evidence from a panel of charities," Journal of Public Economics, Elsevier, vol. 95(5-6), pages 334-343, June.
    4. Huseyin Yildirim & Alvaro Name Correa, 2011. "A Theory of Charitable Fund-Raising with Costly Solicitations," Levine's Working Paper Archive 786969000000000222, David K. Levine.
    5. Kimberley Scharf & Sarah Smith, 2015. "The price elasticity of charitable giving: does the form of tax relief matter?," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 22(2), pages 330-352, April.
    6. Zachary Halberstam & James R. Hines Jr., 2023. "Quality-Aware Tax Incentives for Charitable Contributions," CESifo Working Paper Series 10250, CESifo.
    7. Diamond, Peter, 2006. "Optimal tax treatment of private contributions for public goods with and without warm glow preferences," Journal of Public Economics, Elsevier, vol. 90(4-5), pages 897-919, May.
    8. Zhiyong An, 2023. "On the marginal cost of public funds: the implications of charitable giving and warm glow," Fiscal Studies, John Wiley & Sons, vol. 44(3), pages 299-307, September.
    9. Scharf, Kimberley & Smith, Sarah, 2010. "Rational Inattention to Subsidies for Charitable Contributions," CEPR Discussion Papers 7760, Centre for Economic Policy Research.
    10. Nathalie Monnet & Ugo Panizza, 2017. "A Note on the Economics of Philanthropy," IHEID Working Papers 19-2017, Economics Section, The Graduate Institute of International Studies.
    11. Sonia Manzoor & John Straub, 2005. "The robustness of Kingma’s crowd-out estimate: Evidence from new data on contributions to public radio," Public Choice, Springer, vol. 123(3), pages 463-476, June.
    12. Zhiyong An, 2015. "On the sufficiency of using the elasticity of taxable income to calculate deadweight loss: the implications of charitable giving and warm glow," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 22(6), pages 1040-1047, December.
    13. Paskalev, Zdravko & Yildirim, Huseyin, 2017. "A theory of outsourced fundraising: Why dollars turn into “Pennies for Charity”," Journal of Economic Behavior & Organization, Elsevier, vol. 137(C), pages 1-18.
    14. Aronsson, Thomas & Johansson-Stenman, Olof & Wendner, Ronald, 2019. "Charity, Status, and Optimal Taxation: Welfarist and Paternalist Approaches," Umeå Economic Studies 959, Umeå University, Department of Economics.
    15. repec:grz:wpaper:2016-01 is not listed on IDEAS
    16. Andreoni, James & Payne, Abigail & Smith, Sarah, 2014. "Do grants to charities crowd out other income? Evidence from the UK," Journal of Public Economics, Elsevier, vol. 114(C), pages 75-86.
    17. Aronsson, Thomas & Johansson-Stenman, Olof & Wendner, Ronald, 2016. "Redistribution through Charity and Optimal Taxation when People are Concerned with Social Status," Working Papers in Economics 642, University of Gothenburg, Department of Economics.
    18. Eckel, Catherine C. & Grossman, Philip J. & Johnston, Rachel M., 2005. "An experimental test of the crowding out hypothesis," Journal of Public Economics, Elsevier, vol. 89(8), pages 1543-1560, August.
    19. Alan Krause, "undated". "Taxing and Subsidising Charitable Contributions," Discussion Papers 09/23, Department of Economics, University of York.
    20. Yamamoto, Wataru, 2013. "Negative economic consequences of ethical campaigns?: Market data evidence," MPRA Paper 49070, University Library of Munich, Germany.
    21. Ekaterina Melnik & Jean-Benoît Zimmermann, 2015. "The We and the I: The Logic of Voluntary Associations," AMSE Working Papers 1502, Aix-Marseille School of Economics, France.

    More about this item

    Keywords

    ;
    ;
    ;
    ;

    JEL classification:

    • H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General
    • H30 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - General
    • H40 - Public Economics - - Publicly Provided Goods - - - General
    • L30 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - General

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ces:ceswps:_4479. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Klaus Wohlrabe (email available below). General contact details of provider: https://edirc.repec.org/data/cesifde.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.