Who's in Charge? Donor Targeting Enhances Voluntary Giving to Government

Abstract

This paper investigates the potential effect of allowing donors to target voluntary giving to specific government organizations on government’s ability to generate additional revenues. We design a ‘real donation’ lab experiment to compare giving to general revenue with donor-targeted giving to specific causes. Results show that granting donors control over the use of their funds more than doubles giving to government. A comparison with private organizations that serve similar functions shows that targeting significantly shrinks the disadvantageous gap in voluntary contributions to government. We argue that creating new mechanisms to facilitate voluntary giving has the potential to enhance revenue during fiscal crisis, especially when donations can be targeted for specific programs.

Keywords: donor targeting, voluntary giving to government, lab experiment

JEL Classification: H2, D64, C91