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The Impact of Taxes and Wasteful Government Spending on Giving

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  • Roman M. Sheremeta

    (Weatherhead School of Management, Case Western Reserve University and Economic Science Institute, Chapman University)

  • Neslihan Uler

    (Institute for Social Research, the University of Michigan)

Abstract

We examine the impact of taxes and wasteful government spending on charitable giving. In our model, the government collects a flat-rate tax on income net of donations and wastes part of the tax revenue before redistribution. The model provides theoretical predictions which we test in a framed field experiment. The results of the experiment show that the tax rate has a weak and insignificant effect on giving. The degree of waste, however, has a large, negative and significant effect on giving, with the relationship moderated by the curvature in the utility function.

Suggested Citation

  • Roman M. Sheremeta & Neslihan Uler, 2016. "The Impact of Taxes and Wasteful Government Spending on Giving," Working Papers 16-07, Chapman University, Economic Science Institute.
  • Handle: RePEc:chu:wpaper:16-07
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    Cited by:

    1. Pedro Rey-Biel & Roman Sheremeta & Neslihan Uler, 2018. "When Income Depends on Performance and Luck: The Effects of Culture and Information on Giving," Research in Experimental Economics, in: Anna Gunnthorsdottir & Douglas A. Norton (ed.), Experimental Economics and Culture, volume 20, pages 167-203, Emerald Publishing Ltd.
    2. Duquette, Nicolas J. & Hargaden, Enda P., 2021. "Inequality and giving," Journal of Economic Behavior & Organization, Elsevier, vol. 186(C), pages 189-200.

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    More about this item

    Keywords

    giving; charity donations; tax; waste; redistribution; experiments;
    All these keywords.

    JEL classification:

    • C90 - Mathematical and Quantitative Methods - - Design of Experiments - - - General
    • D64 - Microeconomics - - Welfare Economics - - - Altruism; Philanthropy; Intergenerational Transfers
    • H41 - Public Economics - - Publicly Provided Goods - - - Public Goods

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