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The B.E. Journal of Economic Analysis & Policy

Editor-in-Chief: Jürges, Hendrik / Ludwig, Sandra

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Does One Charitable Contribution Come at the Expense of Another?

David A Reinstein1

1University of Essex,

Citation Information: The B.E. Journal of Economic Analysis & Policy. Volume 11, Issue 1, ISSN (Online) 1935-1682, DOI: 10.2202/1935-1682.2487, June 2011

Publication History

Published Online:
2011-06-30

This article offers supplementary material which is provided at the end of the article.

Abstract

This paper defines, discusses, and measures “expenditure substitution” in charitable giving. Motivated by a model of conditional demand, I consider the extent to which a “temporary shock” that increases an individual's donation to one cause by a particular amount displaces her gifts to other charitable causes. I use the 2001-2007 waves of the PSID/COPPS, the first data set of its kind, to identify this. Households that give more to one type of charity tend to give more to others. However, many of the correlations between the residuals after fixed-effects regressions are negative and significant, particularly for larger donors and for certain categories of charitable giving. Given plausible econometric assumptions, the negative correlations are strong evidence of expenditure substitution. Overall, these results suggest heterogeneous motivations for giving: small givers may be mainly driven by temporary shocks and personal appeals while larger givers may have concave multi-charity warm-glow preferences.

Keywords: altruism; public goods; charitable giving; philanthropy; expenditure substitution; conditional demand; panel data; stochastic assumptions

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