Public Funding of Charities and Competitive Charity Selection

Kimberley Scharf

No 7937, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: Evidence on the price elasticity of private donations to charities and on the crowding out effect of donations by government grants suggests that a redirection of government funds from tax incentives for giving towards direct grants could increase total charity funding. This raises the question of why tax incentives for giving are used instead of direct grants. This paper shows that if government grants to charities face verification constraints, switching from direct grants to donation incentives can produce a pro-competitive effect on charity selection, raising the value of charity provision per dollar of funding.

Keywords: Charities; Government funding; Market structure of nonprofit organizations; Nonprofit organizations; Pro-social motivation (search for similar items in EconPapers)
JEL-codes: H20 H32 H50 (search for similar items in EconPapers)
Date: 2010-08
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Citations: View citations in EconPapers (1)

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