The Nature and Causes of the U-Shaped Charitable Giving Profile

Abstract

The U-shaped income-giving profile, where those in the lower and higher income brackets give higher percentages of their income to charity, has been the subject of much dispute. Examining data from 16,442 households, the authors find clear evidence of a U-shaped relationship. Previous findings contradicting the U-shaped profile are shown to suffer from selection bias that systematically deflates reported lower-income giving levels. Although the U-shaped profile is an appropriate descriptor, it does not reflect typical household behavior. Instead, it is driven almost entirely by the 5% of households that contribute one tenth or more of their after-tax income. Traditionally, the presence of so many highly committed, low-income households has been attributed to religious sect affiliation by the poor. The authors find an additional explanation in that these highly committed, lower-income households are dramatically wealthier than other members of their income classification, in part reflecting the presence of lower-income, higher-asset, retirement-aged households.

Keywords

philanthropy nonprofit religion charitable giving consumer expenditure survey

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