Charitable Giving When Altruism and Similarity are Linked

50 Pages Posted: 15 Nov 2011 Last revised: 18 Nov 2011

See all articles by Julio J. Rotemberg

Julio J. Rotemberg

Harvard University, Business, Government and the International Economy Unit (deceased); National Bureau of Economic Research (NBER) (deceased)

Date Written: November 2011

Abstract

This paper presents a model in which anonymous charitable donations are rationalized by two human tendencies drawn from the psychology literature. The first is people's disproportionate disposition to help those they agree with while the second is the dependence of peoples' self-esteem on the extent to which they perceive that others agree with them. Government spending crowds out the charity that ensues from these forces only modestly. Moreover, people's donations tend to rise when others donate. In some equilibria of the model, poor people give little because they expect donations to come mainly from richer individuals. In others, donations by poor individuals constitute a large fraction of donations and this raises the incentive for poor people to donate. The model predicts that, under some circumstances, charities with identical objectives can differ by obtaining funds from distinct donor groups. The model then provides an interpretation for situations in which the number of charities rises while total donations are stagnant.

Suggested Citation

Rotemberg, Julio J., Charitable Giving When Altruism and Similarity are Linked (November 2011). NBER Working Paper No. w17585. Available at SSRN: https://ssrn.com/abstract=1960132

Julio J. Rotemberg (Contact Author)

Harvard University, Business, Government and the International Economy Unit (deceased) ( email )

Cambridge, MA
United States
617-495-1015 (Phone)
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National Bureau of Economic Research (NBER) (deceased)

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