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Optimal redistributive charity

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  • Thomas Aronsson
  • Olof Johansson‐Stenman
  • Ronald Wendner

Abstract

This paper analyzes optimal redistributive charitable giving in a Mirrleesian framework. The status motive behind charity, the stigma from receiving donations, and transaction costs all work to decrease the optimal marginal subsidies on redistributive charity. Because the existing empirical evidence of these effects (when available) is highly uncertain and context‐dependent, the range of possible outcomes is large, and even includes the possibility that charitable giving should be taxed rather than subsidized. In a natural benchmark case, the optimal tax treatment of charitable giving is consistent with a simple tax credit, whereas pure tax deductions are never part of the optimal policy.

Suggested Citation

  • Thomas Aronsson & Olof Johansson‐Stenman & Ronald Wendner, 2025. "Optimal redistributive charity," Scandinavian Journal of Economics, Wiley Blackwell, vol. 127(1), pages 3-45, January.
    • Handle: RePEc:bla:scandj:v:127:y:2025:i:1:p:3-45
    DOI: 10.1111/sjoe.12573
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