Navigating the Notches: Charity Responses to Ratings

Jennifer Mayo

No 2306, Working Papers from Department of Economics, University of Missouri

Abstract: This paper studies both donor and nonprofit responses to the star rating system designed by Charity Navigator. I find that charities respond to the rating system by changing their behavior to try to get themselves above the star thresholds, leading to "bunching" at the thresholds. This response is equal to the effect of charities halving spending on administration, although some of it is due to misreporting. Furthermore, donors reward charities for this behavior, such that a one-star increase in rating from 3- to the highest 4-star rating raises contributions by 6%. The results carry implications for optimal rating design.

Keywords: Charity ratings; nonprofit behavior; donor behavior (search for similar items in EconPapers)
JEL-codes: D64 H30 L31 (search for similar items in EconPapers)
Pages: 47 pages
Date: 2023-05
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Journal Article: Navigating the Notches: Charity Responses to Ratings (2025)
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Persistent link: https://EconPapers.repec.org/RePEc:umc:wpaper:2306

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