The Effect of Tax Price on Donations: Evidence from Canada

47 Pages Posted: 22 Oct 2019

See all articles by Ross Hickey

Ross Hickey

University of Melbourne; Department of Economics Philosophy and Political Science

Bradley Minaker

University of Guelph

A. Abigail Payne

University of Melbourne - Melbourne Institute of Applied Economic and Social Research; McMaster University, Department of Economics

Joanne Roberts

Yale NUS College

Justin Smith

Wilfrid Laurier University

Date Written: September 21, 2019

Abstract

Estimating the responsiveness of charitable donations to changes in tax incentives is more than estimating a single number. Giving to charity is unlike normal consumption – it involves supporting the delivery of privately-provided public goods. Age and income may influence how tax incentives to give affect both the decision to give as well as how much to give. Using a large administrative dataset from Canada to estimate the tax price elasticity of donations, we estimate that the tax price elasticity of charitable donations is -1 when it is restricted to be the same for all individuals. Across the income distribution, however, we observe an inverse U-shaped distribution in the elasticity that ranges from -1.4 to -0.18. We also find differences in the elasticity across age groupings, and that for the population the elasticity is driven more through the intensive than extensive margin.

Keywords: donations, charity, tax price elasticity

JEL Classification: H31, H24, H40

Suggested Citation

Hickey, Ross and Minaker, Bradley and Payne, A. Abigail and Roberts, Joanne and Smith, Justin, The Effect of Tax Price on Donations: Evidence from Canada (September 21, 2019). Melbourne Institute Working Paper No. 8/19, September 2019. Available at SSRN: https://ssrn.com/abstract=3472761 or http://dx.doi.org/10.2139/ssrn.3472761

Ross Hickey (Contact Author)

University of Melbourne ( email )

Level 5, FBE Building, 111 Barry Street
Parkville, Victoria 3010
Australia

Department of Economics Philosophy and Political Science ( email )

Vancouver
Canada

Bradley Minaker

University of Guelph ( email )

Guelph, Ontario
Canada

A. Abigail Payne

University of Melbourne - Melbourne Institute of Applied Economic and Social Research ( email )

Level 5 111 Barry Street
Carlton, Victoria 3010
Australia
+61 3 9035 4219 (Phone)

McMaster University, Department of Economics ( email )

Hamilton, Ontario L8S 4M4
Canada

Joanne Roberts

Yale NUS College

Singapore

Justin Smith

Wilfrid Laurier University ( email )

75 University Ave W
Waterloo, Ontario N2L 3C5
Canada

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