Predictive models for charitable giving using machine learning techniques

Abstract

Private giving represents more than three fourths of all U.S. charitable donations, about 2% of total Gross Domestic Product (GDP). Private giving is a significant factor in funding the nonprofit sector of the U.S. economy, which accounts for more than 10% of total GDP. Despite the abundance of data available through tax forms and other sources, it is unclear which factors influence private donation, and a reliable predictive mechanism remains elusive. This study aims to develop predictive models to accurately estimate future charitable giving based on a set of potentially influential factors. We have selected several factors, including unemployment rate, household income, poverty level, population, sex, age, ethnicity, education level, and number of vehicles per household. This study sheds light on the relationship between donation and these variables. We use Stepwise Regression to identify the most influential variables among the available variables, based on which predictive models are developed. Multiple Linear Regression (MLR) and machine learning techniques, including Artificial Neural Networks (ANN) and Support Vector Regression (SVR) are used to develop the predictive models. The results suggest that population, education level, and the amount of charitable giving in the previous year are the most significant, independent variables. We propose three predictive models (MLR, ANN, and SVR) and validate them using 10-fold cross-validation method, then evaluate the performance using 9 different measuring criteria. All three models are capable of predicting the amount of future donations in a given region with good accuracy. Based on the evaluation criteria, using a test data set, ANN outperforms SVR and MLR in predicting the amount of charitable giving in the following year.

Optimal Targeting in Fundraising: A Causal Machine-Learning Approach

“…By focusing on effect heterogeneity, we further contribute to a fourth literature strand on heterogeneous responses to fundraising. This literature identifies heterogeneity to (a) characteristics of the charitable organization and the purpose of the charity (e.g., Okten and Weisbrod, 2000;de Vries et al, 2015), (b) characteristics of the donors (e.g., Andreoni et al, 2003;Andreoni and Vesterlund, 2001;Farrokhvar et al, 2018;Rajan et al, 2009;Wiepking and James, 2013), (c) donation motives or preferences of donors (e.g., Bakshy et al, 2012;Harbaugh et al, 2007;Kizilcec et al, 2018), (d) past donation behavior (Schlegelmilch and Diamantopoulos, 1997;Hassell and Monson, 2014), and (e) crowding out (Meer, 2017). Instead of studying single, selected dimensions of heterogeneity, we combine a range of individual characteristics and past donation behavior.…”