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Overhead aversion: Do some types of overhead matter more than others?

Javier E. Portillo and Joseph Stinn

Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), 2018, vol. 72, issue C, 40-50

Abstract: Overhead aversion is an issue of great importance to nonprofit organizations. On one hand, overhead (non-program expenses) is vital to the operational abilities of a nonprofit; on the other hand, there is evidence that donors dislike paying for overhead costs. In this paper, we use an experiment to study overhead from the perspective of donors. First, we replicate the prior finding establishing the existence of overhead aversion. Then we obtain new results by extending this line of research, examining whether donors have an aversion to specific types of overhead (specifically, salaries and fundraising). Our results suggest that donor behavior may be dependent on their outside option. If an overhead-free donation is readily available, then the average donor in our experiment (70–80% of subjects) prefers that charity to receive the donation. However, if donations are not overhead-free, most (approximately two-thirds of subjects) prefer the donation go toward fundraising efforts instead of salary-related expenditures.

Keywords: Charitable giving; Overhead; Philanthropy (search for similar items in EconPapers)
JEL-codes: C9 L30 (search for similar items in EconPapers)
Date: 2018
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Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics) is currently edited by Ofer Azar

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