The price elasticity of charitable giving: does the form of tax relief matter?

Kimberley Scharf and Sarah Smith

No W10/07, IFS Working Papers from Institute for Fiscal Studies

Abstract:

This paper uses a survey-based approach to test alternative methods of channeling tax relief to donors - as a tax rebate for the donor or as a matched payment to the receiving charity. On accounting grounds these two are equivalent but, in line with earlier experimental studies, we find that gross donations are significantly more responsive to a match change than to a rebate change. We show that the difference can largely be explained by the fact that a majority of donors do not adjust their nominal donations in response to a change in subsidy. This evidence adds to the growing empirical literature suggesting that consumers may not react to tax changes. In the case of tax subsidies for donations, this has implications for policy design - we show for the UK that a match-based system is likely to be more effective at increasing money going to charities.

Keywords: Charitable giving; tax subsidies; private provision of public goods (search for similar items in EconPapers)
JEL-codes: C99 D12 D64 H24 H31 H41 (search for similar items in EconPapers)
Date: 2010-05-11
New Economics Papers: this item is included in nep-pbe
References: View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Related works:
Journal Article: The price elasticity of charitable giving: does the form of tax relief matter? (2015)
Working Paper: The price elasticity of charitable giving: does the form of tax relief matter? (2010)
Working Paper: The Price Elasticity of Charitable Giving:Does the Form of Tax Relief Matter? (2010)
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