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The effects of monetary compensation on paid volunteers: Quasi-experimental evidence from Germany

Author

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  • Lieke Voorintholt

    (Institute for Labour Law and Industrial Relations in the European Union (IAAEU), Trier University)

  • Annalisa Tassi

    (Research Institute for the Evaluation of Public Policies of the Bruno Kessler Foundation (FBK-IRVAPP))

Abstract

In recent decades, volunteering has expanded from completely unpaid work to the possibility of receiving a small (tax-free) monetary compensation for the activity performed, with the goal of stimulating these activities. Since the relationship between monetary compensation and prosocial behavior may differ from standard labor market settings, the effectiveness of monetary and tax incentives in this context is an empirical question. Using data from German income tax returns, this paper investigates the effects of changes in monetary compensations on the duration of voluntary work, donations, and market labor income of paid volunteers. Our empirical analysis leverages a German policy change from 2013 that increased the tax-free threshold for volunteer compensations. Following a difference-in-differences approach in combination with a duration model, we do not find evidence that affected volunteers change the number of years they spend in a certain volunteer position. Our results also show that the compensation increase has no spillover effects on labor earnings or donations. Combining our null findings and insights from our theoretical model, we suggest exploring non-incentive-based measures rather than higher compensations to stimulate paid volunteering.

Suggested Citation

  • Lieke Voorintholt & Annalisa Tassi, 2026. "The effects of monetary compensation on paid volunteers: Quasi-experimental evidence from Germany," IAAEU Discussion Papers 202605, Institute of Labour Law and Industrial Relations in the European Union (IAAEU).
    • Handle: RePEc:iaa:dpaper:202605
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    References listed on IDEAS

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    Keywords

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    JEL classification:

    • D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory
    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • D64 - Microeconomics - - Welfare Economics - - - Altruism; Philanthropy; Intergenerational Transfers
    • H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies
    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply
    • J38 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Public Policy

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