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How Does Charitable Giving Respond to Incentives and Income? New Estimates from Panel Data

In: Economic Analysis of Tax Expenditures

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  • Jon Bakija
  • Bradley T. Heim

Abstract

We estimate the elasticity of charitable giving with respect to persistent and transitory price and income changes using a 1979-2006 panel of tax returns. Our estimation procedure allows for anticipation of and gradual adjustment to tax changes, controls for various potential sources of omitted variable bias via fixed effects and income-class specific year dummies, and allows for a flexible non-linear relationship between income and charitable giving. Our most convincing estimates are identified by differences in the time-paths of tax incentives across states, and suggest a persistent price elasticity in excess of one in absolute value. Classification-JEL: H24, H31, D12
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Suggested Citation

  • Jon Bakija & Bradley T. Heim, 2008. "How Does Charitable Giving Respond to Incentives and Income? New Estimates from Panel Data," NBER Chapters, in: Economic Analysis of Tax Expenditures, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberch:13145
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    5. Raj Chetty, 2012. "Bounds on Elasticities With Optimization Frictions: A Synthesis of Micro and Macro Evidence on Labor Supply," Econometrica, Econometric Society, vol. 80(3), pages 969-1018, May.
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    More about this item

    JEL classification:

    • H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies
    • H31 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Household
    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis

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