Rational Inattention to Subsidies for Charitable Contributions

Kimberley Scharf and Sarah Smith
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Sarah Smith: University of Bristol

CAGE Online Working Paper Series from Competitive Advantage in the Global Economy (CAGE)

Abstract: Evidence shows that individuals do not always take tax attributes into account when making their choices. We focus on tax relief for charitable contributions. Although rational donors should view a match and a rebate of the same value as being equivalent, survey evidence shows that nominal donations are more likely to adjust in response to a change in the rebate than to a corresponding change in the match. We argue that these patterns are consistent with the predictions of a model of rational inattention, whereby a majority of individuals choose to process rebate changes while forgoing to process match changes.

Keywords: Salience of Taxes and Subsidies; Rational Inattention (search for similar items in EconPapers)
Date: 2010
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https://warwick.ac.uk/fac/soc/economics/research/c ... _scharf_rational.pdf

Related works:
Working Paper: Rational Inattention to Subsidies for Charitable Contributions (2011)
Working Paper: Rational Inattention to Subsidies for Charitable Contributions (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:cge:wacage:02

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