Donating Time or Money: Are They Substitutes or Complements?

25 Pages Posted: 18 Jun 2012

See all articles by Bastian Hartmann

Bastian Hartmann

Ruhr University of Bochum

Martin Werding

Ruhr University of Bochum; CESifo (Center for Economic Studies and Ifo Institute); CESifo (Center for Economic Studies and Ifo Institute) - Social Policy and Labour Markets

Date Written: May 31, 2012

Abstract

Decisions to donate time or money for charitable purposes are typically seen as make-or-buy decisions, implying that there should be a clear distinction between individuals engaging in one of these two forms of giving and that this distinction should be somehow linked to opportunity costs. But this is not at all what we observe in micro-level data. We therefore suggest an alternative explanation by which time and cash donations are complements rather than substitutes. Assuming that there is asymmetric information about charities’ activities and their effectiveness, doing volunteer work may serve as a screening mechanism enabling donors to better assess the use that is made of the money they could contribute. We formalize this idea and, building on the European Social Survey (ESS), we also provide empirical evidence regarding the co-variation of volunteering and donating money which is suited to support our view.

Keywords: charities, cash donations, volunteer work, asymmetric information, screening, empirical evidence

JEL Classification: D640, D820, J220, L310

Suggested Citation

Hartmann, Bastian and Werding, Martin, Donating Time or Money: Are They Substitutes or Complements? (May 31, 2012). CESifo Working Paper Series No. 3835, Available at SSRN: https://ssrn.com/abstract=2084100 or http://dx.doi.org/10.2139/ssrn.2084100

Bastian Hartmann

Ruhr University of Bochum ( email )

Universitätsstraße 150
Bochum, NRW 44780
Germany

Martin Werding (Contact Author)

Ruhr University of Bochum ( email )

Room GC 04/312
D-44780 Bochum, 44780
Germany

CESifo (Center for Economic Studies and Ifo Institute) ( email )

Poschingerstr. 5
81679 Munich
Germany

CESifo (Center for Economic Studies and Ifo Institute) - Social Policy and Labour Markets ( email )

Munich, 81879
Germany

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