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More Giving or More Givers? The Effects of Tax Incentives on Charitable Donations in the UK

Listed author(s):
  • Almunia, Miguel
  • Lockwood, Ben
  • Scharf, Kimberley

This paper estimates the tax-price elasticity of giving using UK administrative tax return data, exploiting variation from a large tax reform. We estimate both the in- tensive and extensive-margin elasticity, using a novel instrumental variables strategy. Then, we derive new conditions to evaluate the welfare consequences of changes in the generosity of the subsidy to donations. We find a small intensive-margin elasticity of -0.2 and a substantial extensive-margin elasticity of -0.8, yielding a total elasticity of about -1. These estimates mask considerable heterogeneity: high-income individ- uals respond more on the intensive margin, while the extensive-margin response is stronger among low-income taxpayers.

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File URL: http://www.cepr.org/active/publications/discussion_papers/dp.php?dpno=12191
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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 12191.

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Date of creation: Jul 2017
Handle: RePEc:cpr:ceprdp:12191
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  1. Wooldridge, Jeffrey M., 1995. "Selection corrections for panel data models under conditional mean independence assumptions," Journal of Econometrics, Elsevier, vol. 68(1), pages 115-132, July.
  2. William Greene, 2004. "Fixed Effects and Bias Due to the Incidental Parameters Problem in the Tobit Model," Econometric Reviews, Taylor & Francis Journals, vol. 23(2), pages 125-147.
  3. Emmanuel Saez & Joel Slemrod & Seth H. Giertz, 2012. "The Elasticity of Taxable Income with Respect to Marginal Tax Rates: A Critical Review," Journal of Economic Literature, American Economic Association, vol. 50(1), pages 3-50, March.
  4. Gourieroux, Christian & Monfort, Alain & Trognon, Alain, 1984. "Pseudo Maximum Likelihood Methods: Applications to Poisson Models," Econometrica, Econometric Society, vol. 52(3), pages 701-720, May.
  5. Roberts, Russell D, 1984. "A Positive Model of Private Charity and Public Transfers," Journal of Political Economy, University of Chicago Press, vol. 92(1), pages 136-148, February.
  6. Rao, Nirupama, 2016. "Do tax credits stimulate R&D spending? The effect of the R&D tax credit in its first decade," Journal of Public Economics, Elsevier, vol. 140(C), pages 1-12.
  7. Bakija, Jon & Heim, Bradley T., 2011. "How Does Charitable Giving Respond to Incentives and Income? New Estimates From Panel Data," National Tax Journal, National Tax Association, vol. 64(2), pages 615-650, June.
  8. Gerald E. Auten & Holger Sieg & Charles T. Clotfelter, 2002. "Charitable Giving, Income, and Taxes: An Analysis of Panel Data," American Economic Review, American Economic Association, vol. 92(1), pages 371-382, March.
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