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

51 Pages Posted: 1 Feb 2018

See all articles by Miguel Almunia

Miguel Almunia

University of Warwick

Ben Lockwood

University of Warwick - Department of Economics; Centre for Economic Policy Research (CEPR); CESifo (Center for Economic Studies and Ifo Institute)

Kimberley Scharf

University of Birmingham; CEPR; CESifo; VATT

Multiple version iconThere are 3 versions of this paper

Date Written: January 25, 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: donations, charitable giving, tax incentives

JEL Classification: H24, H31, D64

Suggested Citation

Almunia, Miguel and Lockwood, Ben and Scharf, Kimberley, More Giving or More Givers? The Effects of Tax Incentives on Charitable Donations in the UK (January 25, 2018). Available at SSRN: https://ssrn.com/abstract=3109734 or http://dx.doi.org/10.2139/ssrn.3109734

Miguel Almunia

University of Warwick ( email )

Department of Economics
University of Warwick
Coventry CV4 7AL, CV4 7AL
United Kingdom

HOME PAGE: http://www.go.warwick.ac.uk/malmunia

Ben Lockwood

University of Warwick - Department of Economics ( email )

Coventry CV4 7AL
United Kingdom
+44 24 7652 8906 (Phone)
+44 24 7657 2548 (Fax)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

Kimberley Scharf (Contact Author)

University of Birmingham ( email )

Edgbaston, VT Birmingham B15 2TT
United Kingdom

HOME PAGE: http://kimscharf.com

CEPR ( email )

London
United Kingdom

CESifo ( email )

Poschinger Str. 5
Munich, DE-81679
Germany

VATT ( email )

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