More Giving or More Givers? The Effects of Tax Incentives on Charitable Donations in the UK

53 Pages Posted: 25 Aug 2017

See all articles by Miguel Almunia

Miguel Almunia

CUNEF

Benjamin B Lockwood

University of Pennsylvania - The Wharton School

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)

Multiple version iconThere are 3 versions of this paper

Date Written: January 2018

Abstract

This paper estimates the intensive and extensive-margin tax-price elasticities of giving using UK administrative tax return data, exploiting variation from a large tax reform. Using a variety of estimation methods and new instruments for the tax-price of giving, we find an intensive-margin elasticity of about -0.25 and an extensive-margin elasticity of -0.1, yielding a total elasticity of about -0.35. These estimates mask considerable heterogeneity: high-income individuals respond more on the intensive margin, while the extensive-margin response is stronger for low-income taxpayers. We then derive new conditions to evaluate the welfare consequences of changes in the subsidy to donations. This analysis shows that these elasticities can only be rationalized as being optimal if the UK government places a large enough value on providing warm-glow opportunities for UK donors.

Keywords: tax policy, charitable giving

JEL Classification: H240, H310, D640

Suggested Citation

Almunia, Miguel and Lockwood, Benjamin B and Scharf, Kimberley, More Giving or More Givers? The Effects of Tax Incentives on Charitable Donations in the UK (January 2018). CESifo Working Paper Series No. 6591, Available at SSRN: https://ssrn.com/abstract=3024473

Miguel Almunia

CUNEF ( email )

Serrano Anguita 9
Madrid, Madrid 28004
Spain

HOME PAGE: http://www.miguelalmunia.eu

Benjamin B Lockwood

University of Pennsylvania - The Wharton School ( email )

3641 Locust Walk
Philadelphia, PA 19104-6365
United States

Kimberley Scharf (Contact Author)

University of Warwick - Department of Economics ( email )

Coventry CV4 7AL
United Kingdom
44 24 76523 742 (Phone)
44 24 76523 032 (Fax)

CESifo (Center for Economic Studies and Ifo Institute)

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Munich, DE-81679
Germany

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

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London WC2A 2AE
United Kingdom

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