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Testing Motives for Charitable Giving: A Revealed-Preference Methodology with Experimental Evidence

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  • Rahul Deb
  • Robert S. Gazzale
  • Matthew J. Kotchen

Abstract

A large economics literature seeks to understand the reasons why individuals make charitable contributions. Fundamental features of most models of charitable giving are the inclusion of externalities induced by other agents and the Lancasterian characteristics approach to specifying utility functions. This paper develops a general, revealed-preference methodology for testing a variety of preference structures that allow for both externalities and characteristics. The tests are simple linear programs that are transparent, computationally efficient, and straightforward to implement. We show how the technique applies to standard models of privately provided public goods and novel models that account for social comparisons based on relative consumption and donations among individuals. We also conduct an original experiment that enables nonparametric tests of many models on a single data set. The results provide the first revealed-preference evidence on the importance of social comparisons when individuals make charitable contributions. Models that include preferences for either relative consumption or donations yield greater explanatory power than the standard model of impure altruism.

Suggested Citation

  • Rahul Deb & Robert S. Gazzale & Matthew J. Kotchen, 2012. "Testing Motives for Charitable Giving: A Revealed-Preference Methodology with Experimental Evidence," NBER Working Papers 18029, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:18029
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    2. Thomas Demuynck, 2015. "Statistical inference for measures of predictive success," Theory and Decision, Springer, vol. 79(4), pages 689-699, December.
    3. Carvajal, Andrés & Song, Xinxi, 2018. "Testing Pareto efficiency and competitive equilibrium in economies with public goods," Journal of Mathematical Economics, Elsevier, vol. 75(C), pages 19-30.
    4. Michalis Drouvelis & Benjamin M. Marx, 2021. "Dimensions of donation preferences: the structure of peer and income effects," Experimental Economics, Springer;Economic Science Association, vol. 24(1), pages 274-302, March.
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    More about this item

    JEL classification:

    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • D01 - Microeconomics - - General - - - Microeconomic Behavior: Underlying Principles
    • D64 - Microeconomics - - Welfare Economics - - - Altruism; Philanthropy; Intergenerational Transfers
    • H41 - Public Economics - - Publicly Provided Goods - - - Public Goods

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