Impure Prosocial Motivation in Charity Provision: Warm-Glow Charities and Implications for Public Funding

28 Pages Posted: 19 Nov 2013

See all articles by Kimberley A. Scharf

Kimberley A. Scharf

University of Warwick - Department of Economics; CESifo (Center for Economic Studies and Ifo Institute); London School of Economics & Political Science (LSE) - Suntory and Toyota International Centres for Economics and Related Disciplines (STICERD)

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Date Written: November 2013

Abstract

We show that warm-glow motives in provision by competing suppliers can lead to inefficient charity selection. In these situations, discretionary donor choices can promote efficient charity selection even when provision outcomes are non-verifiable. Government funding arrangements, on the other hand, face verification constraints that make them less flexible relative to private donations. Switching from direct grants to government subsidies for private donations can thus produce a positive pro-competitive effect on charity selection, raising the value of charity provision per dollar of funding.

Keywords: Competition in the Nonprofit Sector, Private Provision of Public Goods, Tax Incentives for Giving, Warm Glow

JEL Classification: H2, H3, H4, L3

Suggested Citation

Scharf, Kimberley, Impure Prosocial Motivation in Charity Provision: Warm-Glow Charities and Implications for Public Funding (November 2013). CEPR Discussion Paper No. DP9749, Available at SSRN: https://ssrn.com/abstract=2356979

Kimberley Scharf (Contact Author)

University of Warwick - Department of Economics ( email )

Coventry CV4 7AL
United Kingdom
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CESifo (Center for Economic Studies and Ifo Institute)

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Germany

London School of Economics & Political Science (LSE) - Suntory and Toyota International Centres for Economics and Related Disciplines (STICERD) ( email )

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United Kingdom

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