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The Effect of Effectiveness: Donor Response to Aid Effectiveness in a Direct Mail Fundraising Experiment

Author

Listed:
  • Dean Karlan
  • Daniel H. Wood

Abstract

We test how donors respond to new information about a charity's effectiveness. Freedom from Hunger implemented a test of its direct marketing solicitations, varying letters by whether they include a discussion of their program's impact as measured by scientific research. The base script, used for both treatment and control, included a standard qualitative story about an individual beneficiary. Adding scientific impact information has no effect on whether someone donates, or how much, in the full sample. However, we find that amongst recent prior donors (those we posit more likely to open the mail and thus notice the treatment), large prior donors increase the likelihood of giving in response to information on aid effectiveness, whereas small prior donors decrease their giving. We motivate the analysis and experiment with a theoretical model that highlights two predictions. First, larger gift amounts, holding education and income constant, is a proxy for altruism giving (as it is associated with giving more to fewer charities) versus warm glow giving (giving less to more charities). Second, those motivated by altruism will respond positively to appeals based on evidence, whereas those motivated by warm glow may respond negatively to appeals based on evidence as it turns off the emotional trigger for giving, or highlights uncertainty in aid effectiveness.

Suggested Citation

  • Dean Karlan & Daniel H. Wood, 2014. "The Effect of Effectiveness: Donor Response to Aid Effectiveness in a Direct Mail Fundraising Experiment," NBER Working Papers 20047, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:20047
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    References listed on IDEAS

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    1. Jinyong Hahn & Keisuke Hirano & Dean Karlan, 2011. "Adaptive Experimental Design Using the Propensity Score," Journal of Business & Economic Statistics, Taylor & Francis Journals, vol. 29(1), pages 96-108, January.
    2. Stefano DellaVigna & John A. List & Ulrike Malmendier, 2012. "Testing for Altruism and Social Pressure in Charitable Giving," The Quarterly Journal of Economics, Oxford University Press, vol. 127(1), pages 1-56.
    3. Jean Tirole & Roland Bénabou, 2006. "Incentives and Prosocial Behavior," American Economic Review, American Economic Association, vol. 96(5), pages 1652-1678, December.
    4. Karlan, Dean & McConnell, Margaret A., 2014. "Hey look at me: The effect of giving circles on giving," Journal of Economic Behavior & Organization, Elsevier, vol. 106(C), pages 402-412.
    5. 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.
    6. Crumpler, Heidi & Grossman, Philip J., 2008. "An experimental test of warm glow giving," Journal of Public Economics, Elsevier, vol. 92(5-6), pages 1011-1021, June.
    7. Null, C., 2011. "Warm glow, information, and inefficient charitable giving," Journal of Public Economics, Elsevier, vol. 95(5), pages 455-465.
    8. Small, Deborah A. & Loewenstein, George & Slovic, Paul, 2007. "Sympathy and callousness: The impact of deliberative thought on donations to identifiable and statistical victims," Organizational Behavior and Human Decision Processes, Elsevier, vol. 102(2), pages 143-153, March.
    9. Reinstein David A, 2011. "Does One Charitable Contribution Come at the Expense of Another?," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 11(1), pages 1-54, June.
    10. Duncan, Brian, 2004. "A theory of impact philanthropy," Journal of Public Economics, Elsevier, vol. 88(9-10), pages 2159-2180, August.
    11. Daniel Kahneman, 2003. "Maps of Bounded Rationality: Psychology for Behavioral Economics," American Economic Review, American Economic Association, vol. 93(5), pages 1449-1475, December.
    12. Lant Pritchett, 2002. "It pays to be ignorant: A simple political economy of rigorous program evaluation," Journal of Economic Policy Reform, Taylor & Francis Journals, vol. 5(4), pages 251-269.
    13. repec:feb:framed:0087 is not listed on IDEAS
    14. Null, C., 2011. "Warm glow, information, and inefficient charitable giving," Journal of Public Economics, Elsevier, vol. 95(5-6), pages 455-465, June.
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    Cited by:

    1. Laura Metzger & Isabel Günther, 2015. "Making an impact? The relevance of information on aid effectiveness for charitable giving. A laboratory experiment," Courant Research Centre: Poverty, Equity and Growth - Discussion Papers 182, Courant Research Centre PEG.
    2. repec:eee:pubeco:v:158:y:2018:i:c:p:152-167 is not listed on IDEAS
    3. Metzger, Laura, 2015. "Making an impact? The importance of aid effectiveness for charitable giving. A laboratory experiment," Annual Conference 2015 (Muenster): Economic Development - Theory and Policy 112835, Verein für Socialpolitik / German Economic Association.

    More about this item

    JEL classification:

    • D64 - Microeconomics - - Welfare Economics - - - Altruism; Philanthropy; Intergenerational Transfers
    • H41 - Public Economics - - Publicly Provided Goods - - - Public Goods
    • L31 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Nonprofit Institutions; NGOs; Social Entrepreneurship
    • O12 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development

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