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Charitable giving in the German welfare state: Fiscal incentives and crowding out

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  • Bönke, Timm
  • Massarrat-Mashhadi, Nima
  • Sielaff, Christian

Abstract

Governmental activities in welfare states influence private charitable giving predominantly in two ways: (1) government spending on the provision of public goods may cause crowding out of private charitable contributions; and (2) tax incentives may boost private charitable giving. For a rich sample of German income tax returns, we estimate elasticities of charitable giving regarding tax incentives, income and governmental spending. Using censored quantile regression, we are able to derive results for different points of the underlying distribution of charitable giving. Assuming a world with impure altruism (Andreoni 1990), we find evidence for impurely altruistic giving behaviour. Taking crowding out into account, tax deductibility of charitable giving suffices to foster private giving to offset foregone tax revenues.

Suggested Citation

  • Bönke, Timm & Massarrat-Mashhadi, Nima & Sielaff, Christian, 2010. "Charitable giving in the German welfare state: Fiscal incentives and crowding out," Discussion Papers 2010/30, Free University Berlin, School of Business & Economics.
  • Handle: RePEc:zbw:fubsbe:201030
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    References listed on IDEAS

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    Cited by:

    1. Peter Backus & Nicky Grant, 2016. "Consistent Estimation of the Tax-Price Elasticity of Charitable Giving with Survey Data," The School of Economics Discussion Paper Series 1606, Economics, The University of Manchester.
    2. Wodon, Quentin & Alleyne, Betty & Cong, Lin & Mulusa, Judy & Niami, Farhad, 2014. "Accounting for Trends in Charitable Tax Deductions: Framework and Application to the District of Columbia," MPRA Paper 45392, University Library of Munich, Germany.
    3. Bönke, Timm & Werdt, Clive, 2015. "Charitable giving and its persistent and transitory reactions to changes in tax incentives: Evidence from the German taxpayer panel," Discussion Papers 2015/2, Free University Berlin, School of Business & Economics.
    4. Adena, Maja, 2014. "Tax-price elasticity of charitable donations: Evidence from the German taxpayer panel," Discussion Papers, Research Unit: Economics of Change SP II 2014-302, Social Science Research Center Berlin (WZB).

    More about this item

    Keywords

    charitable giving; crowding out; price and income elasticity; censored quantile regression; income tax return data;

    JEL classification:

    • C31 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models; Quantile Regressions; Social Interaction Models
    • H31 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Household
    • H53 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Welfare Programs

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