As non-governmental providers of public goods, charities are funded by governments and also by individuals and foundations. How do foundation grants to charities affect private donations to these organizations? The standard economic theory on voluntary contributions to the public good hypothesizes that foundation giving will crowd out private donations. An alternative giving dynamic may arise whereby foundations act as complements to private donations because they can provide a signal of charity quality to individuals and thereby influence their decisions to give. This article offers a rigorous empirical analysis of the relationship between foundation and private donations by utilizing a unique data set on Canadian social welfare and community charities matched with their foundation donors. Empirical findings confirm that an additional dollar of foundation grants to charities crowds in private giving by three dollars on average, suggesting that private donors may look to foundation grants for information on charities to make informed giving decisions.
AndreoniJames. 1989. “Giving with Impure Altruism: Applications to Charity and Ricardian Equivalence.” Journal of Political Economy97 (6): 1447–58.
2.
AndreoniJames. 2006. “Leadership Giving in Charitable Fundraising.” Journal of Public Economic Theory8 (1): 1–22.
3.
AndreoniJamePayneAbigail. 2003. “Do Government Grants to Private Charities Crowd Out Giving or Fund-raising?” American Economic Review93 (3): 792–812.
4.
AndreoniJamesPayneAbigail. 2011a. “Crowding-out Charitable Contributions in Canada: New Knowledge from the North.” NBER Working Paper No.17635.
5.
AndreoniJamesPayneAbigail. 2011b. “Is Crowding Out Due Entirely to Fundraising? Evidence from a Panel of Charities.” Journal of Public Economics95 (5–6): 334–43.
6.
AndreoniJamesPayneAbigailSmithSarah. 2014. “Do Grants to Charities Crowd Out Other Income? Evidence from the UK.” Journal of Public Economics114 (4): 75–86.
7.
BellemareMarcMasakiTakaakiPepinskyThomas. 2017. “Lagged Explanatory Variables and the Estimation of Causal Effects.” The Journal of Politics3 (79): 949–63.
8.
BergstromTheodoreBlumeLarwrenceVarianHal. 1986. “On the Private Provision of Public Goods.” Journal of Public Economics29 (1): 25–49.
9.
BilodeauMarcSlivinskiAl. 1998. “Rational Nonprofit Enterpreneurship.” Journal of Economics and Management Strategy7 (4): 551–571.
10.
BredtmannJulia. 2016. “Does Government Spending Crowd Out Voluntary Labor and Donations?” IZA Institute of Labor Economics Working Paper No. 299.
11.
BroughmanBrianCooterRobert. 2005. “Charity, Publicity and Donation Registry.” The Economists’ Voice2 (3): 1–8.
12.
ChoudhuryAskarNartmanNathan. 2015. “Regional Differential Wealth Effect on Home Value: A Cross-sectional Analysis.” Journal of Economics and Economic Education Research16 (1): 273–90.
13.
DelfinFranciscoTangShui-Yan. 2008. “Foundation Impact on Environmental Nongovernmental Organizations.” Nonprofit and Voluntary Sector Quarterly37 (4): 603–25.
14.
DellaVignaStefanoListJohnMalmendierUlrike. 2012. “Testing for Altruism and Social Pressure in Charitable Giving.” Quarterly Journal of Economics127 (1): 1–56.
15.
GlazerAmihai. 2016. “The Profit-maximizing Non-profit.” Oxford Economic Papers68 (2): 201–315.
GoddfriedMichael. 2008. “College Crwod-in: How Private Donations Positively Affect Alumni Giving.” International Journal of Educational Advancement8 (2): 51–70.
18.
GruberJonathanHungermanDaniel. 2007. “Faith-based Charity and Crowd-out during the Great Depression.” Journal of Public Economics91 (5–6): 1043–1069.
19.
HarrisonGlennListJohn. 2004. “Field Experiments.” Journal of Economic Literature42 (4): 1009–55.
20.
HermalinBenjamin. 1998. “Toward an Ecobomic Theory of Leadership: Leading by Example.” American Economic Review88 (5): 1188–206.
21.
HeutelGarth. 2014. “Crowding Out and Crowding In of Private Dontations and Government Grants.” Public Finance Review, May 30: 1–33.
22.
JackKelseyRecaldeMaria. 2015. “Local Leadership and the Voluntary Provision of Public Goods: Field Evidence from Bolivia.” Journal of Public Economics, 122 (2): 80–93.
23.
KarlanDeanListJohn. 2012. “How Can Bill and Melinda Gates Increase Other People’s Donations to Fund Public Goods,” NBER Working Paper No. 17954.
24.
KarlanDeanListJohnShafirEldar. 2011. “Small Matches and Charitable Giving: Evidence from a Natural Field Experiment.” Journal of Public Economics95 (5–6): 344–50.
25.
KhannaJoytiPosnettJohnSandlerTodd. 1995. “Charity Donations in the UK: New Evidence Based on Panel Data.” Journal of Public Economics56 (2): 257–72.
26.
KhannaJoytiSandlerTodd. 2000. “Partners in Giving: The Crowding-in Effects of UK Government Grants.” European Economic Review44 (8): 1543–56.
27.
KhovrenkovIryna. 2016. “Size-based Analysis of Charitable Foundations: New Evidence from Canadian Data.” Canadian Public Policy42 (3): 337–49.
28.
KingmaBruceMcClellandRobert. 1995. “Public Radio Stations are Really, Really Not Public Goods: Charitable and Impure Altruism.” Annals of Public and Cooperative Economics66 (1): 65–76.
29.
ListJohn. 2011. “The Market for Charitable Giving.” Journal of Economic Perspectives25 (2): 157–80.
30.
LuttmerErzo. 1998. “Group Loyalty and the Taste for Redistribution.” Journal of Political Economy109 (3): 500–28.
31.
MosleyJenniferGalaskiewiczJoseph. 2015. “The Relationship between Philanthropic Foundation Funding and State-Level Policy in the Era of Welfare Reform.” Nonprofit and Voluntary Sector Quarterly44 (6): 1225–54.
32.
PayneAbigail. 1998. “Does the Government Crowd-out Private Donations? New Evidence from a Sample of Non-profit Firms.” Journal of Public Economics69 (3): 323–45.
33.
PayneAbigail. 2001. “Measuring the Effect of Federal Research Funding on Private Donations at Research Universities: Is Federal Research Funding More than a Substitute for Private Donations?” International Tax and Public Finance8 (5–6): 731–51.
34.
PayneAbigail. 2012. “Changing Landscapes for Charities in Canada: Where Should We Go?” School of Public Policy Research Papers5 (34), University of Calgary, Canada.
PorterMichaelKramerMark. 1999. “Philanthropy’s New Agenda: Creating Value.” Harvard Business ReviewNovember-December: 121–130.
37.
ReeceWilliam. 1979. “Charitable Contributions: New Evidence on Household Behaviour.” American Economic Review69 (1): 142–51.
38.
RibarDavidWilhelmMark. 2002. “Altruistic and Joy-of-Giving Motivations in Charitable Behaviour.” Journal of Political Economy110 (2): 425–57.
39.
RondeauDavidListJohn A.. 2008. “Matching and Challenge Gifts to Charity: Evidence from Laboratory and Natural Field Experiments.” Experimental Economics11 (3): 253–67.
40.
Rose-AckermanSusan. 1980. “United Charities: An Economic Analysis.” In Community Organizations: Studies in Resource Mobilization and Exchange, edited by MilofskyCarl, 136–56. New York: Oxford University Press.
41.
Rose-AckermanSusan. 1981. “Do Government Grants to Charity Reduce Private Donations.” In Nonprofit Firms in a Three-Sector Economy, edited by WhiteMichelle, 313–29. Washington, DC: Urban Institute.
42.
ShangJenCrosonRachel. 2009. “A Field Experiment in Charitable Contribution: the Impact of Social Information on the Voluntary Provision of Public Goods.” The Economic Journal119 (540): 1422–39.
43.
SimmonsWalterEmanueleRosemarie, 2004. “Does Government Spending Crowd Out Dontations of Time and Money?” Public Finance Review32 (5): 498–511.
SteinbergRichard. 1985. “Empirical Relations between Government Spending and Charitable Donations.” Journal of Voluntary Action Research14 (2–3): 54–64.
47.
SteinbergRichard. 1991. “Does Government Spending Crowd Out Donations?” Annals of Public and Cooperative Economics62 (4): 591–612.
48.
StockJamesWrightJonathanYogoMotohiro. 2002. “A Survey of Weak Instruments and Weak Identification in Generalized Method of Moments.” Journal of the American Statistical Association20 (4): 518–29.
49.
ThorntonJeremy, 2010. “Explaining Unrestricted Giving to Charitable Foundations: A Transaction Cost Approach.” International Journal of Industrial Organization28 (1): 44–53.
50.
VarianHal. 1994. “Sequential Contributions to Public Good.” Journal of Public Economics53 (1994): 165–86.
51.
VesterlundLise. 2003. “The Information Value of Sequential Fundraising.” Journal of Public Economics87 (3–4): 627–57.
52.
WarrPeter. 1982. “Pareto Optimal Redistribution and Private Charity.” Journal of Public Economics19 (1): 131–38.
Supplementary Material
Please find the following supplemental material available below.
For Open Access articles published under a Creative Commons License, all supplemental material carries the same license as the article it is associated with.
For non-Open Access articles published, all supplemental material carries a non-exclusive license, and permission requests for re-use of supplemental material or any part of supplemental material shall be sent directly to the copyright owner as specified in the copyright notice associated with the article.
