The efficiency of public support to private charity: An econometric analysis of the income tax treatment of charitable

Karl-Heinz Paqué

No 151, Kiel Working Papers from Kiel Institute for the World Economy (IfW Kiel)

Abstract: Economists like to justify public redistributive activity with standard externality arguments. While not denying the existence of a private charity market based on altruism, feelings of social responsibility, pure taste for giving or even -egoistic speculation on future rewards to charity, they seriously doubt the efficiency of the market outcome. The prime reason for the presumed market failure lies in a peculiar feature of the charity market, namely: the inherent division of consumption into a material component enjoyed by the donee and a spiritual component enjoyed by the donor precisely by making somebody else better off. For other potential donors this creates the chance for a free ride: as long as their preferences for giving at least partially depend on the well-being of the recipients - pure private good cases are excluded -, they adjust far others' transfers to the poor by reducing their own contributions to an independent adjustment equilibrium level with marginal social utility greater than marginal cost of the transfers. Thus the overall level of charitable giving will remain below Samuelson's optimal public goods supply, and a case for public redistribution in the broadest sense (including the provision of Welfare services) seems to be established.

Date: 1982
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
https://www.econstor.eu/bitstream/10419/47041/1/015028151.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:zbw:ifwkwp:151

Access Statistics for this paper

More papers in Kiel Working Papers from Kiel Institute for the World Economy (IfW Kiel) Contact information at EDIRC.
Bibliographic data for series maintained by ZBW - Leibniz Information Centre for Economics ().