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Distinguishing Transitory and Permanent Price Elasticities of Charitable Giving with Pre-Announced Changes in Tax Law

Jon Bakija ()

No 2000-06, Department of Economics Working Papers from Department of Economics, Williams College

Abstract: This paper develops and applies a new estimation technique for distinguishing transitory and permanent price and income elasticities of charitable giving using panel data. Twelve-year individual averages of income and deductions are combined with information on legislated changes in tax schedules, to construct instruments for permanent price and income variation. Unlike the previous literature, pre-announced changes in tax law are used to identify transitory variation, and fixed-effects are used to control for unobserved heterogeneity. The timing of giving is found to be significantly more responsive to tax incentives than is the long-run level of giving.

Keywords: Charitable Donations; Incentive Effects of Taxation; Estimation; Empirical Analysis; Intertemporal Consumer Choice (search for similar items in EconPapers)
JEL-codes: H24 H31 D12 D91 (search for similar items in EconPapers)
Date: 2000-10
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Handle: RePEc:wil:wileco:2000-06