Optimal Incentives to Give

43 Pages Posted: 24 Jun 2020

See all articles by Marco Castillo

Marco Castillo

Department of Economics, Texas A&M University; IZA Institute of Labor Economics

Ragan Petrie

Texas A&M University - Department of Economics; University of Melbourne - Melbourne Institute: Applied Economic & Social Research

Date Written: June 1, 2020

Abstract

We examine optimal incentives for charitable giving with a large-scale field experiment involving 26 charities and over 112,000 unique individuals. The price of giving is varied by offering a fixed match if the donation meets a threshold amount (e.g. "give at least $25 and the charity receives a $25 match''). Responses are used to structurally estimate a model of charitable giving. The model estimates are employed to evaluate the effectiveness of various counterfactual match incentive schemes, taking into account the goals of the charity and donor preferences. Two of these optimal incentives were subsequently implemented in a follow-up field study. They were found to be effective at implementing the desired goals, as predicted by theory and our simulations. Our findings highlight the pitfalls of relying on a particular parameterization of a policy to evaluate effectiveness. The best-guess incentives in our initial field experiment turned out to be ineffective at increasing donations because optimal incentives should have been set higher.

Suggested Citation

Castillo, Marco and Petrie, Ragan, Optimal Incentives to Give (June 1, 2020). Available at SSRN: https://ssrn.com/abstract=3616460 or http://dx.doi.org/10.2139/ssrn.3616460

Marco Castillo

Department of Economics, Texas A&M University ( email )

Allen Building
4228 TAMU
College Station, TX 77843-3137
United States

IZA Institute of Labor Economics ( email )

P.O. Box 7240
Bonn, D-53072
Germany

Ragan Petrie (Contact Author)

Texas A&M University - Department of Economics ( email )

4228 TAMU
College Station, TX 77843-4228
United States

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

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

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