Does the government crowd-out private donations? New evidence from a sample of non-profit firms

Payne, A. Abigail

doi:10.1016/s0047-2727(98)00005-x

Cited by 193 publications

(134 citation statements)

References 22 publications

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“…This finding is largely consistent with much of the empirical work on this question. With the exception of Payne (1998), empirical studies have found crowding out to be relatively minor (5-25%) or have found evidence of some small amount of crowding in.…”

Section: Resultsmentioning

confidence: 99%

“…Steinberg (1991) reviews 13 studies of crowding out and concludes that a dollar of government spending crowds out between US$0.005 and US$0.35 of private donations. More recent studies find levels of crowding out that include: nil for public radio matching grants (Straub, 2003); US$0.23 for government funding of international relief organizations (Ribar and Wilhelm, 2002); and about US$0.50 for shelter, human services and similar organizations (Payne, 1998). 4 The possibility of crowding in is supported by several recent studies.…”

Section: Background and Motivationmentioning

confidence: 93%

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An experimental test of the crowding out hypothesis

Eckel

Grossman

Johnston

2005

Journal of Public Economics

184

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We report the results of laboratory experiments that examine whether third-party contributions crowd out private giving to charity. Subjects play a single dictator game with a charity as the recipient. The subject chooses his preferred charity from a list. There are four treatment combinations: two initial allocations and two frames. Initial allocations are either US$18 for the subject and US$2 for the charity, or US$15 and US$5, respectively, and the subject is then given the opportunity to allocate additional funds if desired. The decision frame is also varied to affect subjects' perceptions of the task. In one frame, subjects are simply informed of the initial allocations between themselves and their chosen charity. In the other, subjects are told that their US$20 allocation has been taxed, and the amount allocated to their chosen charity. The structure of payoffs is identical in both frames. In the first frame, we see a level of crowding out that is close to zero, far less than other experimental studies; in the second frame, we observe nearly 100% crowding out. Bolton and Katok (1998). Subjects are paired with a charity of their own choosing selected from a list of 10. In one pair of treatments, we use a neutral frame, where third-party support for the charity is implemented in the form of a difference in initial allocations between the subject and his chosen charity. This frame allows for fiscal illusion; there is no explicit indication of the source of funding for the third-party transfer to the charities. The second frame introduces fiscal transparency: The source of the funding for the third-party transfer is an explicit tax on the subject's own endowment. This frame approximates the assumptions of theoretical models where agents know the source and target of third-party funding. Because the transfer comes from the subject's own initial endowment, our second frame represents an extreme form of fiscal transparency. We find no evidence of crowding out in the first frame, but rather an indication of a small amount of crowding in. In the second frame, we report almost complete crowding out.In the next section, we briefly review the theoretical and empirical studies. In Section 3, we review in greater detail the previous experimental studies. We then discuss the procedures of our experiment, Section 4, and our findings, Section 5. We conclude in Section 6. Background and motivationTheoretical research suggests that government giving should be neutral in its effect on net contributions to nonprofit institutions under the condition that no one is taxed more than his pretax contribution to the charity (Warr, 1982(Warr, , 1983Roberts, 1984Roberts, , 1987Bergstrom et al., 1986). Under these conditions, the effect of any third-party transfer to the nonprofit can be neutralized by the donor's response. This conclusion is premised on the assumptions of fiscal transparency (i.e., donors are fully aware that government giving is financed by the taxes they pay) and that donors' benefit from the public good ari...

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Section: Resultsmentioning

confidence: 99%

Section: Background and Motivationmentioning

confidence: 93%

An experimental test of the crowding out hypothesis

Eckel

Grossman

Johnston

2005

Journal of Public Economics

184

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“…Some studies find no significant relationship between government funding and private giving (Brooks 1999), and other studies find a crowding-in effect, i.e. that the level of government grants is positively correlated with private donations (Andreoni and Payne 2011;Boberg-Fazlić and Sharp 2015;Hughes and Luksetich 1999;Payne 1998). This latter interrelation is explained by increased trustworthiness and reputation of a non-profit organization when receiving government funds.…”

Section: Theories and Hypotheses On Determinants Of Giving To Charitamentioning

confidence: 97%

Examining the Association of Welfare State Expenditure, Non-profit Regimes and Charitable Giving

Pennerstorfer

Neumayr

2016

Voluntas

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This paper explores cross-country variations in charitable giving and investigates the association of welfare state policies with private philanthropy. Hypotheses are drawn from crowding-out theory and considerations about the influence of a country's mixed economy of welfare. We add to the on-going discussion concerning the crowding-out hypothesis with empirical evidence by looking at specific charitable subsectors people donate to across countries. Using Eurobarometer survey data that include 23 countries, we find no evidence for a crowding-out effect, but rather a crosswise crowding-in effect of private donations. Moreover, giving behaviour differs between non-profit regimes.Résumé Cet article explore les écarts qui existent, d'un pays à l'autre, entre les dons de charité et enquête sur l'association des politiques d'É tat relatives à l'assistance sociale à la philanthropie privée. Les hypothèses reposent sur la théorie d'éviction et des considérations portant sur l'influence d'une économie mixte d'un pays en matière d'assistance sociale. À la discussion courante sur l'hypothèse d'éviction, nous avons intégré des évidences empiriques en examinant des soussecteurs de bienfaisance précis auxquels les populations de divers pays contribuent. En utilisant les données du sondage Eurobaromètre portant sur 23 pays, nous Electronic supplementary material The online version of this article

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“…We assume that the functional form of the long-run relationship between private donations, government grants, commercial revenues, and fundraising expenditures is given by Payne (1998) and Andreoni and Payne (2011), the variables are expressed in (dollar) levels, rather than logs. Consequently, the β coefficients capture the longrun changes in private giving due to changes in the explanatory variables in monetary (dollar)…”

Section: Basic Empirical Model and Econometric Issuesmentioning

confidence: 99%

Private Donations, Government Grants, Commercial Activities, and Fundraising: Cointegration and Causality for NGOs in International Development Cooperation

Herzer

Nunnenkamp

2013

World Development

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Abstract:NGOs could help scale up foreign aid efforts by mobilizing private donations. However, fundraising activities do not necessarily result in higher donations, and substitution effects between different sources of revenue may diminish the overall pool of NGOs' resources. This paper examines the determinants of private donations to US-based NGOs engaged in international development cooperation. We employ panel cointegration and causality techniques to analyze the interactions between private donations, government grants, commercial revenues and fundraising expenditures. According to our results, a marginal dollar spent on fundraising yields almost five dollars in new donations in the long run. Government grants crowd in private donations in the long run, whereas commercial revenues crowd out donations in the long run. Moreover, our panel vector error correction model reveals complex short-run dynamics.

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Does the government crowd-out private donations? New evidence from a sample of non-profit firms

Cited by 193 publications

References 22 publications

An experimental test of the crowding out hypothesis

An experimental test of the crowding out hypothesis

Examining the Association of Welfare State Expenditure, Non-profit Regimes and Charitable Giving

Private Donations, Government Grants, Commercial Activities, and Fundraising: Cointegration and Causality for NGOs in International Development Cooperation

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