Government Support and Charitable Donations: A Meta-Analysis of the Crowding-out Hypothesis

Abstract

Wright for their extensive and useful comments. A previous version of this meta-analysis was presented at the 42nd ARNOVA Annual Conference in Hartford, CT (USA). 2 Government Support and Charitable Donations: A Meta-Analysis of the Crowding-Out Hypothesis ABSTRACTWith the growing body of literature on governance styles in which nonprofit organizations are involved in creating and implementing public services, there is a need for robust evidence on the effects of public funding on nonprofit revenues. This paper systematically reviews previous studies on the crowding-out hypothesis, which holds that private charitable donations are lower in situations of higher government support and vice versa. We find that about two-thirds of previous estimates find a negative correlation (crowding-out), while one third of the estimates find a positive correlation (crowding-in). The results are strongly shaped by the research methods that are used. In experiments, a $1 increase in government support is associated with an average $0.64 decrease in private donations, while non-experimental data analyses find an average increase of $0.06. Random-effects regression models show that, contrary to arguments that are prevalent in the literature, studies that take subsidies to organizations as a measure of government support are more likely to estimate crowding-out than studies that use a measure of direct government expenditures. Central government support is associated with higher charitable donations, while measures that include multiple levels of government tend to find negative correlations. The results challenge the consistency of prior research findings and demonstrate the contextual dependence of the validity of the crowding-out hypothesis.

The Contingent Value of Political Connections on Donations to Chinese Foundations: Exploring the Moderating Role of Transparency

“…First, existing literature assumes that nonprofits with political connections can be observed by donors and the public, thus increasing their legitimacy and trustworthiness. However, there is no guarantee that donors or the public are aware of the political connections formed by nonprofit organizations (de Wit & Bekkers, 2016). Transparency thus serves as an important mechanism for donors to be aware of the level of political connections enjoyed by nonprofit organizations.…”

Crowdfunding Acts as a Funding Substitute and a Legitimating Signal for Nonprofit Performing Arts Organizations

“…When crowdfunding is integrated into an organization’s funding portfolio, however, it has the potential to impact other funding sources. While evidence of interrelationships among sources of revenue has been mixed (de Wit & Bekkers, 2017; Krawczyk et al, 2017), researchers have suggested that funding sources are more likely to influence each other when potential donors have access to information about the organization’s success in raising funds, which may factor into their contribution decisions (Bradley et al, 2019; de Wit & Bekkers, 2017). Crowdfunding incorporates a mechanism that provides such information.…”

“…Experimental research found that individual funders are subject to substitution effects at both the individual and the aggregate levels (Eckel et al, 2005; Kim & Van Ryzin, 2014). A recent meta-analysis of studies investigating this phenomenon demonstrates that government funding crowds out private charitable donations two thirds of the time (de Wit & Bekkers, 2017).…”

Global Giving

“…The hypothesis of pure altruism states that the desire to help others, if aware and given the opportunity to have an impact, leads individuals to adapt their level of giving to the societal need for contributions. Experiments finding that most participants do not do so proportionally is taken as evidence for non-altruistic motivations for giving, as if people derive utility from the act of giving and not so much from the increase in well-being among recipients of donations [44][45][46]. The reasons why people enjoy the act of giving more so than the increase in the well-being of recipients include social image concerns (the anticipated reputational benefits of giving), the anticipation of guilt, and the desire to express support for certain values by giving time or money to a specific cause [46,47].…”