How Can Bill and Melinda Gates Increase Other People’s Donations to Fund Public Goods?

16 Pages Posted: 9 Jul 2012

See all articles by Dean S. Karlan

Dean S. Karlan

Northwestern University - Kellogg School of Management; Yale University; Innovations for Poverty Action; Massachusetts Institute of Technology (MIT) - Abdul Latif Jameel Poverty Action Lab (J-PAL); National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR)

John A. List

University of Chicago - Department of Economics; National Bureau of Economic Research (NBER); IZA Institute of Labor Economics

Multiple version iconThere are 3 versions of this paper

Date Written: April 1, 2012

Abstract

We develop a simple theory which formally describes how charities can resolve the information asymmetry problems faced by small donors by working with large donors to generate quality signals. To test the model, we conducted two large-scale natural field experiments. In the first experiment, a charity focusing on poverty reduction solicited donations from prior donors and either announced a matching grant from the Bill and Melinda Gates Foundation, or made no mention of a match. In the second field experiment, the same charity sent direct mail solicitations to individuals who had not previously donated to the charity, and tested whether naming the Bill and Melinda Gates Foundation as the matching donor was more effective than not identifying the name of the matching donor. The first experiment demonstrates that the matching grant condition generates more and larger donations relative to no match. The second experiment shows that providing a credible quality signal by identifying the matching donor generates even more and larger donations than not naming the matching donor. Importantly, the treatment effects persist long after the matching period, and the quality signal is quite heterogeneous — the Gates’ effect is much larger for prospective donors who had a record of giving to “poverty-oriented” charities. These two pieces of evidence support our model of quality signals as a key mechanism through which matching gifts inspire donors to give.

Keywords: public goods, charitable fundraising, asymmetric information, matching grant

JEL Classification: D12, D71, D82, H41, O12

Suggested Citation

Karlan, Dean S. and List, John A., How Can Bill and Melinda Gates Increase Other People’s Donations to Fund Public Goods? (April 1, 2012). Center for Global Development Working Paper No. 292, Available at SSRN: https://ssrn.com/abstract=2102724 or http://dx.doi.org/10.2139/ssrn.2102724

Dean S. Karlan (Contact Author)

Northwestern University - Kellogg School of Management ( email )

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John A. List

University of Chicago - Department of Economics ( email )

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National Bureau of Economic Research (NBER)

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IZA Institute of Labor Economics

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