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Reconsidering the philanthropic foundation minimum payout policy under a “new normal”

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  • Afik, Zvika
  • Katz, Hagai

Abstract

With the increasing salience of foundations in many policy fields, and recent changes in market conditions, policies towards foundations designed decades ago seem outdated. In this article we suggest reassessing foundation payout minimums. To examine the impact of payout rates on grantmaking foundations lifespan and performance under “new normal” economics, we simulate multiple foundations lifecycles using Monte Carlo methods in diverse capital market conditions, with varied investment and payout strategies.

Suggested Citation

  • Afik, Zvika & Katz, Hagai, 2019. "Reconsidering the philanthropic foundation minimum payout policy under a “new normal”," Journal of Policy Modeling, Elsevier, vol. 41(2), pages 219-233.
    • Handle: RePEc:eee:jpolmo:v:41:y:2019:i:2:p:219-233
    DOI: 10.1016/j.jpolmod.2018.09.004
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    References listed on IDEAS

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    1. Barbetta, Gian Paolo & Colombo, Luca & Turati, Gilberto, 2015. "Regulating European grant-making foundations. Lessons from the USA experience?," Journal of Policy Modeling, Elsevier, vol. 37(5), pages 763-781.
    2. Black, Fischer & Scholes, Myron S, 1973. "The Pricing of Options and Corporate Liabilities," Journal of Political Economy, University of Chicago Press, vol. 81(3), pages 637-654, May-June.
    3. Sansing, Richard & Yetman, Robert, 2006. "Governing private foundations using the tax law," Journal of Accounting and Economics, Elsevier, vol. 41(3), pages 363-384, September.
    4. Lawrence H Summers, 2014. "U.S. Economic Prospects: Secular Stagnation, Hysteresis, and the Zero Lower Bound," Business Economics, Palgrave Macmillan;National Association for Business Economics, vol. 49(2), pages 65-73, April.
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    More about this item

    Keywords

    Grantmaking foundations; Payout; Policy; Monte Carlo simulations; Investment;
    All these keywords.

    JEL classification:

    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods
    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • L31 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Nonprofit Institutions; NGOs; Social Entrepreneurship
    • L38 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Public Policy

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