Are Charitable Donations and Volunteering Substitutes or Complements? New Evidence from Recent Tax Changes
27 Pages Posted: 23 Jul 2022
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
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