The Bonus-Income Donation Norm

52 Pages Posted: 12 Dec 2019

See all articles by Michalis Drouvelis

Michalis Drouvelis

University of Birmingham - Department of Economics; CESifo (Center for Economic Studies and Ifo Institute) - Ifo Institute

Adam Isen

U.S. Department of the Treasury, Office of Tax Analysis (OTA)

Benjamin Marx

University of Illinois at Urbana-Champaign

Date Written: 2019

Abstract

Can social norms affect fundamental patterns of behavior such as income effects? Studies of determinants of giving to charities and other individuals yield a wide range of income-effect estimates. We conduct two experiments to first test whether the effect of income on charitable giving depends on whether the income is earned and then test whether any difference in the effects by income source can be explained by social norms. Our first experiment induces random variation in both earned income and windfall bonuses and shows that only bonuses increases charitable donations. The second experiment uses an incentivized coordination game to investigate whether social norms can explain this donation pattern. Perceptions of what most people would consider a morally appropriate donation depend on the amount of income and whether it is a windfall. The norms elicited in the second experiment match the donation patterns in the first experiment both overall and across subject demographics, pointing to social norms as a key determinant of charitable giving.

Keywords: charitable, donation, warm glow, social preferences, income effect, experiment

JEL Classification: D010, D640, A130

Suggested Citation

Drouvelis, Michalis and Isen, Adam and Marx, Benjamin, The Bonus-Income Donation Norm (2019). CESifo Working Paper No. 7961, Available at SSRN: https://ssrn.com/abstract=3498718 or http://dx.doi.org/10.2139/ssrn.3498718

Michalis Drouvelis (Contact Author)

University of Birmingham - Department of Economics ( email )

Economics Department
Birmingham, B15 2TT
United Kingdom

HOME PAGE: http://sites.google.com/site/michalisdrouvelis/

CESifo (Center for Economic Studies and Ifo Institute) - Ifo Institute ( email )

Poschinger Str. 5
Munich, 01069
Germany

Adam Isen

U.S. Department of the Treasury, Office of Tax Analysis (OTA) ( email )

1500 Pennsylvania Ave., N.W.
Washington, DC 22203
United States

Benjamin Marx

University of Illinois at Urbana-Champaign ( email )

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