Is Crowding Out Due Entirely to Fundraising? Evidence from a Panel of Charities

34 Pages Posted: 20 Sep 2010 Last revised: 27 Sep 2010

See all articles by James Andreoni

James Andreoni

University of California, San Diego (UCSD)

A. Abigail Payne

University of Melbourne - Melbourne Institute of Applied Economic and Social Research; McMaster University, Department of Economics

Date Written: September 2010

Abstract

When the government gives a grant to a private charitable organization, do the donors to that organization give less? If they do, is it because the grants crowd out donors who feel they gave through taxes (classic crowd out), or is it because the grant crowds out the fund-raising of the charities who, after getting the grant, reduce efforts of fund-raising (fund-raising crowd out)? This is the first paper to separate these two effects. Using a panel of more than 8,000 charities, we find that crowding out is significant, at about 72 percent. We find this crowding out is due primarily to reduced fund-raising. Depending on which types of organizations are included in the analysis, crowding out attributable to classic crowd-out ranges from 30% to a slight crowd-in effect, while fund-raising crowd out ranges from 70% to over 100% of all crowd out. Such a finding could have important consequences for how governments structure grants to non-profits. Our results indicate, for example, that requirements that charities match a fraction of government grants with increases in private donations might be a feasible policy that could reduce the detrimental effects of crowding out.

Suggested Citation

Andreoni, James and Payne, A. Abigail, Is Crowding Out Due Entirely to Fundraising? Evidence from a Panel of Charities (September 2010). NBER Working Paper No. w16372. Available at SSRN: https://ssrn.com/abstract=1678915

James Andreoni (Contact Author)

University of California, San Diego (UCSD) ( email )

9500 Gilman Drive
La Jolla, CA 92093-0508
United States

HOME PAGE: http://econ.ucsd.edu/~jandreon/

A. Abigail Payne

University of Melbourne - Melbourne Institute of Applied Economic and Social Research ( email )

Level 5 111 Barry Street
Carlton, Victoria 3010
Australia
+61 3 9035 4219 (Phone)

McMaster University, Department of Economics ( email )

Hamilton, Ontario L8S 4M4
Canada

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