Are Political and Charitable Giving Substitutes? Evidence from the United States

66 Pages Posted: 11 Jan 2020 Last revised: 20 Jul 2023

See all articles by Pinar Yildirim

Pinar Yildirim

University of Pennsylvania - The Wharton School; University of Pennsylvania - Department of Economics; National Bureau of Economic Research (NBER)

Andrei Simonov

Michigan State University - Eli Broad Graduate School of Management; Centre for Economic Policy Research (CEPR)

Maria Petrova

Barcelona Graduate School of Economics (Barcelona GSE)

Ricardo Perez-Truglia

University of California, Los Angeles (UCLA); National Bureau of Economic Research (NBER)

Date Written: December 22, 2019

Abstract

Using micro data from the American Red Cross (ARC) and Federal Election Commission (FEC) in two natural experiments, we provide evidence that political and charitable giving are substitutes. In the first natural experiment, we estimate the effects of a positive shock to charitable donations to the ARC: foreign natural disaster events. We find that while charitable donations to ARC increase by 34.9% in the six weeks following a disaster, political donations decline by 18.8% in the same period. Put differently, each 1% increase in the charitable giving to ARC is accompanied by a 0.53% drop in political donations. At the average county-week level donations, the implied effect of a $1 increase in charitable giving is a $0.42 decline in political donations. In the second natural experiment, we estimate the effects of a positive shock to political giving: advertisements for political campaigns. Using a designated market area (DMA) boundary approach, we find that political advertisements increase political giving while they decrease charitable donations to ARC. Our estimates imply that each 1% increase in the political giving is accompanied by a 0.59% drop in charitable donations to ARC. At the average county-week level donations, the implied effect of a $1 increase in political giving is a $0.33 decline in charitable donations. The crowding out elasticities suggest that political and charitable giving are relatively close substitutes. We provide a number of robustness checks, and we discuss potential causal mechanisms.

Keywords: charitable giving, political contributions, altruism, media

JEL Classification: H41, L31

Suggested Citation

Yildirim, Pinar and Simonov, Andrei and Petrova, Maria and Perez-Truglia, Ricardo, Are Political and Charitable Giving Substitutes? Evidence from the United States (December 22, 2019). Available at SSRN: https://ssrn.com/abstract=3508534 or http://dx.doi.org/10.2139/ssrn.3508534

Pinar Yildirim (Contact Author)

University of Pennsylvania - The Wharton School ( email )

3641 Locust Walk
Philadelphia, PA 19104-6365
United States

University of Pennsylvania - Department of Economics

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Andrei Simonov

Michigan State University - Eli Broad Graduate School of Management ( email )

645 N. Shaw Lane, 321 Eppley Center
East Lansing, MI 48824-1122
United States

HOME PAGE: http://www.andreisimonov.com

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

Maria Petrova

Barcelona Graduate School of Economics (Barcelona GSE) ( email )

Ramon Trias Fargas, 25-27
Barcelona, Barcelona 08005
Spain

Ricardo Perez-Truglia

University of California, Los Angeles (UCLA) ( email )

405 Hilgard Avenue
Box 951361
Los Angeles, CA 90095
United States

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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