Charity as a Signal of Trustworthiness
University of Zurich, Center for Comparative and International Studies (CIS); IZA
IZA Discussion Paper No. 5299
Being perceived as trustworthy comes with substantial economic benefits in many situations. Making other people think you are a trustworthy person may, therefore, be an important motive for charity and other forms of prosocial behavior, provided these activities work as signals of trustworthiness. This paper shows that donating money to an NGO substantially raises the other players' beliefs about the donorsﾒ trustworthiness in a simple trust game. Consequently, donors receive higher transfers. The magnitude of these benefits is substantial.
Number of Pages in PDF File: 19
Keywords: charity, signaling, trust, trustworthiness
JEL Classification: C72, C92, H41
Date posted: November 14, 2010