The Impact of Taxes on Charitable Giving: Empirical Evidence from the Korean Labor and Income Panel Study
Households’ or individuals’ decision regarding charitable giving may differby type of recipient of the gift. In light of the relative paucity of empirical research on the impact of tax incentives on charitable giving outside Western countries, empirical research on this topic in South Korea is valuable in order to compare effects across difference tax regimes and in different institutional environments. We use the Korean Labor and Income Panel Study (KLIPS), whose panel structure helps alleviate the omitted variable bias that has often appeared in previous literature using cross-sectional data. This study aims to perform a robust estimation of tax price and income elasticities for charitable contributions in South Korea. First, we use exogenous changes in tax rates resulting from Korean Tax Reform to construct instrumental variables (IVs) for the change in the price of giving. Two tests are undertaken to determine whether the IVs are weak or not: a size-corrected test of a weak IV robust inference for the linear instrumental variable model with autocorrelation and heteroscedasticity recently devised by Finlay and Magnusson; and the LIML CUE-GMM estimation. We find that our instruments are not weak. Following Smith and Blundell, and Rivers and Vuong , we then estimate the random effect (RE) Tobit Model using acontrol function based on the IVs. Using the procedure developed by Mundlak, we estimated a fixed effect model from the RE Tobit model. The tax price and income elasticities from the pseudo-fixed effect Tobit model are found to be significant and the magnitudes are similar to those from the GMM fixed effect and CUE-GMM models. To investigate additional features of the conditional distribution of charitable giving in South Korea, we use the Censored Quantile regression with instrumental variables (CQIV) recently proposed by Chernozhukov, Fernandex-Val, and Kowalski. These estimate indicate that the price elasticity of charitable giving is very heterogenous among donors, while income has a quite uniform and positive effect over the whole range of the giving distribution significantly.
|Date of creation:||31 Aug 2011|
|Date of revision:|
|Contact details of provider:|| Postal: |
Web page: http://mpra.ub.uni-muenchen.de
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Hansen, Lars Peter & Heaton, John & Yaron, Amir, 1996. "Finite-Sample Properties of Some Alternative GMM Estimators," Journal of Business & Economic Statistics, American Statistical Association, vol. 14(3), pages 262-80, July.
- Amanda E. Kowalski, 2009. "Censored Quantile Instrumental Variable Estimates of the Price Elasticity of Expenditure on Medical Care," NBER Working Papers 15085, National Bureau of Economic Research, Inc.
- Brooks, Arthur C., 2002. "Charitable Giving in Transition Economies: Evidence from Russia," National Tax Journal, National Tax Association, vol. 55(4), pages 743-53, December.
- José Mata & José A. F. Machado, 2005. "Counterfactual decomposition of changes in wage distributions using quantile regression," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 20(4), pages 445-465.
- Chamberlain, Gary, 1982. "Multivariate regression models for panel data," Journal of Econometrics, Elsevier, vol. 18(1), pages 5-46, January.
- Frank Kleibergen & Richard Paap, 2003.
"Generalized Reduced Rank Tests using the Singular Value Decomposition,"
Tinbergen Institute Discussion Papers
03-003/4, Tinbergen Institute.
- Kleibergen, Frank & Paap, Richard, 2006. "Generalized reduced rank tests using the singular value decomposition," Journal of Econometrics, Elsevier, vol. 133(1), pages 97-126, July.
- Richard Paap & Frank Kleibergen, 2004. "Generalized Reduced Rank Tests using the Singular Value Decomposition," Econometric Society 2004 Australasian Meetings 195, Econometric Society.
- Kleibergen, F.R. & Paap, R., 2003. "Generalized Reduced Rank Tests using the Singular Value Decomposition," Econometric Institute Research Papers EI 2003-01, Erasmus University Rotterdam, Erasmus School of Economics (ESE), Econometric Institute.
- 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.
- Halvorsen, Robert & Palmquist, Raymond, 1980. "The Interpretation of Dummy Variables in Semilogarithmic Equations," American Economic Review, American Economic Association, vol. 70(3), pages 474-75, June.
- Charles T. Clotfelter, 1985. "Federal Tax Policy and Charitable Giving," NBER Books, National Bureau of Economic Research, Inc, number clot85-1, October.
- Honore, Bo E, 1992. "Trimmed LAD and Least Squares Estimation of Truncated and Censored Regression Models with Fixed Effects," Econometrica, Econometric Society, vol. 60(3), pages 533-65, May.
- Smith, Richard J & Blundell, Richard W, 1986. "An Exogeneity Test for a Simultaneous Equation Tobit Model with an Application to Labor Supply," Econometrica, Econometric Society, vol. 54(3), pages 679-85, May.
- Randolph, William C, 1995. "Dynamic Income, Progressive Taxes, and the Timing of Charitable Contributions," Journal of Political Economy, University of Chicago Press, vol. 103(4), pages 709-38, August.
- Keith Finlay & Leandro M. Magnusson, 2009.
"Implementing Weak Instrument Robust Tests for a General Class of Instrumental Variables Models,"
0901, Tulane University, Department of Economics.
- Keith Finlay & Leandro M. Magnusson, 2009. "Implementing weak-instrument robust tests for a general class of instrumental-variables models," Stata Journal, StataCorp LP, vol. 9(3), pages 398-421, September.
- Adam Rosen, 2009.
"Set identification via quantile restrictions in short panels,"
CeMMAP working papers
CWP26/09, Centre for Microdata Methods and Practice, Institute for Fiscal Studies.
- Rosen, Adam M., 2012. "Set identification via quantile restrictions in short panels," Journal of Econometrics, Elsevier, vol. 166(1), pages 127-137.
- Barrett, Kevin S. & McGuirk, Anya M. & Steinberg, Richard S., 1997. "Further Evidence on the Dynamic Impact of Taxes on Charitable Giving," National Tax Journal, National Tax Association, vol. 50(2), pages 321-34, June.
- Rabe-Hesketh, Sophia & Skrondal, Anders & Pickles, Andrew, 2005. "Maximum likelihood estimation of limited and discrete dependent variable models with nested random effects," Journal of Econometrics, Elsevier, vol. 128(2), pages 301-323, October.
- Jinyong Hahn & Jerry Hausman & Guido Kuersteiner, 2004. "Estimation with weak instruments: Accuracy of higher-order bias and MSE approximations," Econometrics Journal, Royal Economic Society, vol. 7(1), pages 272-306, 06.
- Powell, James L., 1986. "Censored regression quantiles," Journal of Econometrics, Elsevier, vol. 32(1), pages 143-155, June.
- Jon Bakija, 2000. "Distinguishing Transitory and Permanent Price Elasticities of Charitable Giving with Pre-Announced Changes in Tax Law," Department of Economics Working Papers 2000-06, Department of Economics, Williams College.
- Andreoni,J. & Vesterlund,L., 1998.
"Which is the fair sex? : Gender differences in altruism,"
10, Wisconsin Madison - Social Systems.
- James Andreoni & Lise Vesterlund, 2001. "Which Is The Fair Sex? Gender Differences In Altruism," The Quarterly Journal of Economics, MIT Press, vol. 116(1), pages 293-312, February.
- Andreoni, James & Vesterlund, Lise, 2001. "Which is the Fair Sex? Gender Differences in Altruism," Staff General Research Papers 1951, Iowa State University, Department of Economics.
- Schokkaert, Erik, 2006. "The Empirical Analysis of Transfer Motives," Handbook on the Economics of Giving, Reciprocity and Altruism, Elsevier.
- Rivers, Douglas & Vuong, Quang H., 1988. "Limited information estimators and exogeneity tests for simultaneous probit models," Journal of Econometrics, Elsevier, vol. 39(3), pages 347-366, November.
- Hansen, B.E., 1991.
"Inference when a Nuisance Parameter is Not Identified Under the Null Hypothesis,"
RCER Working Papers
296, University of Rochester - Center for Economic Research (RCER).
- Hansen, Bruce E, 1996. "Inference When a Nuisance Parameter Is Not Identified under the Null Hypothesis," Econometrica, Econometric Society, vol. 64(2), pages 413-30, March.
- Bilias, Yannis & Chen, Songnian & Ying, Zhiliang, 2000. "Simple resampling methods for censored regression quantiles," Journal of Econometrics, Elsevier, vol. 99(2), pages 373-386, December.
- Koenker, Roger, 2004. "Quantile regression for longitudinal data," Journal of Multivariate Analysis, Elsevier, vol. 91(1), pages 74-89, October.
- Mundlak, Yair, 1978. "On the Pooling of Time Series and Cross Section Data," Econometrica, Econometric Society, vol. 46(1), pages 69-85, January.
- Clotfelter, Charles T., 1985. "Federal Tax Policy and Charitable Giving," National Bureau of Economic Research Books, University of Chicago Press, edition 1, number 9780226110486.
- Victor Chernozhukov & Ivan Fernandez-Val & Amanda E. Kowalski, . "Censored Quantile Instrumental Variable Estimation via Control Functions," Boston University - Department of Economics - Working Papers Series wp2009-012, Boston University - Department of Economics.
- Abrevaya, Jason & Dahl, Christian M, 2008. "The Effects of Birth Inputs on Birthweight," Journal of Business & Economic Statistics, American Statistical Association, vol. 26, pages 379-397.
- Catherine C. Eckel & Philip J. Grossman, 2004. "Giving to Secular Causes by the Religious and Nonreligious: An Experimental Test of the Responsiveness of Giving to Subsidies," Monash Economics Working Papers archive-07, Monash University, Department of Economics.
- Marcelo J. Moreira, 2003. "A Conditional Likelihood Ratio Test for Structural Models," Econometrica, Econometric Society, vol. 71(4), pages 1027-1048, 07.
- John A. List, 2007. "On the Interpretation of Giving in Dictator Games," Journal of Political Economy, University of Chicago Press, vol. 115, pages 482-493.
- Stock, James H & Wright, Jonathan H & Yogo, Motohiro, 2002. "A Survey of Weak Instruments and Weak Identification in Generalized Method of Moments," Journal of Business & Economic Statistics, American Statistical Association, vol. 20(4), pages 518-29, October.
When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:36845. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Ekkehart Schlicht)
If references are entirely missing, you can add them using this form.