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Trust, ability‐to‐pay, and charitable giving

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  • Ida Ferrara
  • Paul Missios

Abstract

In the literature on privately provided public goods, altruism has been motivated by what contributions can accomplish (public goods philanthropy), by the pleasure of giving (warm‐glow philanthropy), or by the desire to personally make a difference (impact philanthropy). Underlying these motives is the idea that individuals trust that their donations reach their goal. We revisit these models but allow for distrust in the institutional structures involved. An important result we derive is that trust considerations determine whether crowding out is less or more than complete, and we thus open up possibilities in terms of the extent of crowding out not currently available. We also model socially motivated philanthropy when income‐heterogeneous donors take trust and ability‐to‐pay into account. With ability‐to‐pay in social motivation, an important result we obtain is that low‐income donors may contribute more than high‐income donors (in both absolute and percentage‐of‐income terms), giving a potential theoretical foundation to the frequently observed “U‐shaped” pattern of giving.

Suggested Citation

  • Ida Ferrara & Paul Missios, 2020. "Trust, ability‐to‐pay, and charitable giving," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 22(3), pages 583-629, June.
    • Handle: RePEc:bla:jpbect:v:22:y:2020:i:3:p:583-629
    DOI: 10.1111/jpet.12393
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    1. Janusz Kud³a & Robert Kruszewski & Maciej Dudek & Konrad Walczyk, 2023. "The impact of bequest taxation on savings and transfers," Equilibrium. Quarterly Journal of Economics and Economic Policy, Institute of Economic Research, vol. 18(2), pages 333-365, June.
    2. James Alm & Raul A. Barreto, 2024. "Trust in Government in a Changing World: Shocks, Tax Evasion, and Economic Growth," Working Papers 2405, Tulane University, Department of Economics.
    3. Alm James & Barreto Raul A., 2024. "Trust in Government in a Changing World: Shocks, Tax Evasion, and Economic Growth," The B.E. Journal of Macroeconomics, De Gruyter, vol. 24(1), pages 439-487, January.

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    More about this item

    JEL classification:

    • D03 - Microeconomics - - General - - - Behavioral Microeconomics: Underlying Principles
    • H31 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Household
    • H41 - Public Economics - - Publicly Provided Goods - - - Public Goods
    • Q53 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Air Pollution; Water Pollution; Noise; Hazardous Waste; Solid Waste; Recycling

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