Tax-Price Elasticities of Charitable Giving and Selection of Declaration: Panel Study of South Korea

Hiroki Kato (), Tsuyoshi Goto and Youngrok Kim
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Hiroki Kato: Graduate School of Economics, Osaka University, Osaka, Japan
Youngrok Kim: Research Institute for Socionetwork Strategies, Kansai University, Osaka, Japan

No 23-05, Discussion Papers in Economics and Business from Osaka University, Graduate School of Economics

Abstract: This study estimates the tax-price elasticity of donations, considering the bias caused by the fact that the claim of tax incentives for charitable giving depends on the taxpayer’s decision. We first present a way to eliminate this bias by supporting the intention-to-treat analysis. We then estimate the price elasticity by our method, using exogenous variation in tax incentives due to the 2014 tax reform in South Korea. We find that a 1% increase in donation prices reduces donor contributions by 1.6% and the donor ratio by 2.6%. Next, we use the control function approach, one of the instrumental variable methods, to examine how endogeneity from the decision to use tax incentives biases the estimation of price elasticity. We find that those with large amounts of charitable giving without tax incentives do not declare their giving, leading to an underestimation (in absolute value) of the price elasticity of donors’ contribution amount.

Keywords: Charitable giving; Tax incentives; Price elasticities; Selection; Declaration. (search for similar items in EconPapers)
JEL-codes: D64 H24 H31 (search for similar items in EconPapers)
Pages: 30 pages
Date: 2023-03
New Economics Papers: this item is included in nep-des, nep-pbe and nep-pub
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Working Paper: Tax-Price Elasticities of Charitable Giving and Selection of Declaration: Panel Study of South Korea (2023)
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Persistent link: https://EconPapers.repec.org/RePEc:osk:wpaper:2305

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