Are Charitable Donations and Volunteering Substitutes or Complements? New Evidence from Recent Tax Changes

27 Pages Posted: 23 Jul 2022

See all articles by Bradley Heim

Bradley Heim

Indiana University Bloomington - School of Public & Environmental Affairs (SPEA)

Laura Montenovo

Indiana University

Abstract

We examine the degree of complementarity or substitutability of donations of time and money. Utilizing data on volunteering from the Panel Study of Income Dynamics that spans 2001-2019, we estimate the impact of recent changes in the after-tax price of giving on the amount of volunteering (both on the extensive and intensive margins). We find that donations of time and money are generally complements, though the effect size was modest on the extensive margin – an increase in the tax price of 0.01 is estimated to decrease volunteering by less than 0.4% - and was insignificant on the intensive margin. Further, estimated effects decrease appreciably when within-individual over time variation is utilized. The results imply that tax reforms that raise the price of giving may lead to a reduction in the number of individuals who volunteer, albeit modestly.

Keywords: tax reforms, philanthropic behavior, cash donations, volunteering, labor supply, complements, substitutes

Suggested Citation

Heim, Bradley and Montenovo, Laura, Are Charitable Donations and Volunteering Substitutes or Complements? New Evidence from Recent Tax Changes. Available at SSRN: https://ssrn.com/abstract=4170753 or http://dx.doi.org/10.2139/ssrn.4170753

Bradley Heim (Contact Author)

Indiana University Bloomington - School of Public & Environmental Affairs (SPEA) ( email )

1315 East Tenth Street
Bloomington, IN 47405
United States

Laura Montenovo

Indiana University

107 S Indiana Ave
100 South Woodlawn
Bloomington, IN 47405
United States

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