Joint Crowdout: an Empirical Study of the Impact of Federal Grants on State Government Expenditures and Charitable Donations

36 Pages Posted: 23 Aug 2000 Last revised: 1 Apr 2010

See all articles by Lawrence B. Lindsey

Lawrence B. Lindsey

American Enterprise Institute (AEI); National Bureau of Economic Research (NBER)

Richard Steinberg

University of Cambridge - Judge Business School

Date Written: January 1990

Abstract

We estimate the effect of exogenous federal expenditure cutbacks on state social service expenditures and on charitable donations. In the process, we also estimate tax and income effects and explore the impact of community environment and "need" variables. Data consist of a unique three-year panel of aggregate itemized giving by state and income class and government expenditures by state. Our results confirm the 'flypaper effect' of federal grants on state spending and show statistically significant but partial crowdout of charitable donations. The flypaper effects appears to dominate the crowdout of donations, so that federal grants are especially productive of overall social service expenditures. Finally, we find that the state's poverty rate is a particularly strong and positive determinant of charitable giving.

Suggested Citation

Lindsey, Lawrence B. and Steinberg, Richard Jay, Joint Crowdout: an Empirical Study of the Impact of Federal Grants on State Government Expenditures and Charitable Donations (January 1990). NBER Working Paper No. w3226. Available at SSRN: https://ssrn.com/abstract=227983

Lawrence B. Lindsey (Contact Author)

American Enterprise Institute (AEI) ( email )

1150 17th Street, N.W.
Washington, DC 20036
United States
202.862.5925 (Phone)
202.862.5819 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Richard Jay Steinberg

University of Cambridge - Judge Business School ( email )

Trumpington Street
Cambridge, CB2 1AG
United Kingdom
+44 1223 339638 (Phone)
+44 1223 339701 (Fax)

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