Using Field Experiments and Naturally Occurring Data to Understand How State Policies Impact Charitable Giving

Georgia State University Research Foundation, Inc., Atlanta GA

Investigators

Abstract

Using Field Experiments and Naturally Occurring Data to Understand How State Policies Impact Charitable Giving This project uses experimental methods to investigate the drivers of charitable contributions and the impact of state tax policy on competition among charities as well as on overall charitable contribution. The overall aim is to identify motives for charitable contributions and how tax policy that changes the after-tax cost of giving to designated charities affects charitable selection, allocation of contributions, and total giving. In the framed field experiment subjects will allocate a fixed amount between themselves and selected charitable organizations. Treatments will make salient that a tax credit is available for contributions to certain charities and vary both the number and mix of eligible and ineligible charities that can be selected as potential recipients. The experiment will allow the researchers to identify whether tax credits impact (i) which charities are selected as recipients, (ii) the likelihood an individual gives, (iii) the allocation of donations across organizations, and (iv) the overall amount given. The research also uses data on a charitable tax credit program in Arizona combined with IRS data to explore (i) the factors that drive giving to charities, (ii) the impact of state tax policy on giving to eligible charities, and (iii) the impact of the policy on giving to charitable organizations not eligible for tax credits. To achieve these aims, the proposal outlines an econometric analysis that will use changes in the Arizona tax code that have differential impacts across charities to examine how opportunity cost and income affect donor behavior and competition among charities. The project research provides a novel empirical approach to understand what drives charitable contributions. Specifically, the research will identify how donors respond to decreasing opportunity cost and relaxing liquidity constraints on giving. Second, it contributes to a burgeoning literature exploring competition among charities and how policies that change cost of giving to one organization impact donations to others. Third, the research will contribute to a growing body of work using experimental methods to inform policy design. It extends this literature by exploring a new application: the use of such tools to understand how states can design tax codes to increase private support for specific charitable causes and the subsequent impacts on the charitable sector as a whole. Finally, the research contributes to the literature on unintended consequences but is the first to do so in the context of an increasingly popular policy instrument: the use of tax credits as a means for individuals to redirect general tax revenues to specific uses. This research will impact the policy debate surrounding ways to increase funding for selected charitable causes. One innovative policy to achieve such aims is to give individual taxpayers the power to direct tax revenues to charities of their choosing. First, by improving the understanding of what drives giving, the research will inform the design of such programs and identify new ways for states to stimulate private funding for selected charitable causes. Second, state level tax credits may crowd out support for other charities. Knowledge of such consequences is essential to the design of effective public policy. Third, this research supports answers to the longstanding question of whether increased giving to particular charities expands the charitable pie or merely crowds out giving to other charities. Fourth, the research will utilize partnerships with nonprofit organizations to disseminate findings and promote the use of evidence-based methods in the charitable giving sector.