IDEAS home Printed from
MyIDEAS: Log in (now much improved!) to save this paper

Should Gift Giving Be Subsidized?

Listed author(s):
  • Ralph Chami
  • Connel Fullenkamp

Charitable giving, which is generally intended to serve as nonmarket insurance, is large and pervasive. Two thirds of all households gave charitable gifts in 1995, the sum of which was over $100 billion. Stiglitz (1987), Kaplow (1995) and others argue that gift giving should be subsidized because it causes a positive consumption externality, but they derive this conclusion in a setting of complete information. We introduce risk and uncertainty into the gift giving decision in a simple general equilibrium model. When the source of risk is endogenous with respect to gift giving, we show that the optimal subsidy unambiguously falls, and could become a tax on giving. When gift giving provides nonmarket insurance against endogenous risk, it imposes a negative externality on the market and the market responds by reallocating risk in ways that are detrimental to the recipients. Our findings demonstrate the importance of considering the market's reaction to gift giving when determining the optimal subsidy.

To our knowledge, this item is not available for download. To find whether it is available, there are three options:
1. Check below under "Related research" whether another version of this item is available online.
2. Check on the provider's web page whether it is in fact available.
3. Perform a search for a similarly titled item that would be available.

Paper provided by Northwestern University/University of Chicago Joint Center for Poverty Research in its series JCPR Working Papers with number 75.

in new window

Date of creation: 01 Feb 1999
Handle: RePEc:wop:jopovw:75
Contact details of provider: Postal:
Harris Graduate School of Public Policy Studies, 1155 E. 60th Street Chicago, IL 60637

Phone: 773-702-0472
Web page:

More information through EDIRC

No references listed on IDEAS
You can help add them by filling out this form.

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:wop:jopovw:75. 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: (Thomas Krichel)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.