Government Growth and Private Contributions to Charity
Thomas A. Garrett
Federal Reserve Bank of St. Louis - Research Division
Russell M. Rhine
St. Mary's College of Maryland - Department of Economics
July 17, 2009
FRB of St. Louis Working Paper No. 2007-012E
We exploit the time series properties of charitable giving data to provide additional insights into the relationship between charitable contributions and government spending. Our sample period covers the last half of the 20th century, a period marked by increased growth in both government spending and charitable giving. Cointegration tests reveal a significant long-run relationship between several categories of charitable giving and government spending. Granger causality tests are designed to capture any short-run giving and spending relationship, and provide the opportunity to examine whether changes in fundraising efforts by charities influence government spending. Evidence suggests that charitable contributions to education responds quite differently to state and local government education expenditures versus federal government expenditures. We argue that the government spending and charitable giving relationship is dependent upon the source of government revenue, how this revenue is used by institutions of learning, and the rational ignorance of private donors.
Number of Pages in PDF File: 35
Keywords: Government Spending, Charity, Altruism, Crowding Out
JEL Classification: D12, D64, H3
Date posted: May 21, 2008 ; Last revised: July 17, 2009
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