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On the Crowding-Out Effects of Tax-Financed Charitable Contributions by the Government

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  • Alan Krause

Abstract

An important question in the literature on charitable contributions is the extent to which tax-financed contributions by the government crowd out private contributions. This paper examines a simple model of charitable contributions in which there exist both warm-glow and public good motives for giving, but where the warm-glow motive is competitive in the sense that individuals evaluate their own contribution relative to that of their peers. It is shown that the competitive element of the warm-glow motive may exacerbate or attenuate the crowding-out effect, depending upon certain preference and income parameters. However, as the warm-glow motive for giving becomes purely competitive, crowding out is exacerbated and is almost dollar-for-dollar.

Suggested Citation

  • Alan Krause, 2011. "On the Crowding-Out Effects of Tax-Financed Charitable Contributions by the Government," Discussion Papers 11/01, Department of Economics, University of York.
  • Handle: RePEc:yor:yorken:11/01
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    File URL: https://www.york.ac.uk/media/economics/documents/discussionpapers/2011/1101.pdf
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    Cited by:

    1. Hungerman, Daniel M., 2014. "Public goods, hidden income, and tax evasion: Some nonstandard results from the warm-glow model," Journal of Development Economics, Elsevier, vol. 109(C), pages 188-202.

    More about this item

    Keywords

    Charitable contributions; warm-glow; crowding out; public goods;

    JEL classification:

    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • H41 - Public Economics - - Publicly Provided Goods - - - Public Goods

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