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Are Political and Charitable Giving Substitutes? Evidence from the United States

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Listed:
  • Pinar Yildirim

    (Marketing, The Wharton School, University of Pennsylvania, Philadelphia, Pennsylvania 19104)

  • Andrei Simonov

    (Finance, Eli Broad College of Business, Michigan State University, East Lansing, Michigan 48824; Centre for Economic Policy Research, London EC1V 0DX, United Kingdom)

  • Maria Petrova

    (Department of Economics and Business, Universitat Pompeu Fabra (UPF), 08002 Barcelona, Spain; Barcelona Institute for Political Economy and Governance (IPEG), 08005 Barcelona, Spain; Barcelona School of Economics, 08005 Barcelona, Spain; ICREA (Institució Catalana de Recerca i Estudis Avançats), 08010 Barcelona, Spain)

  • Ricardo Perez-Truglia

    (Department of Economics, University of California, Berkeley, Berkeley, California 94720)

Abstract

Using microdata from the American Red Cross (ARC) and the Federal Election Commission (FEC) in two natural experiments, we provide evidence that political giving and charitable giving are substitutes. In the first natural experiment, we estimate the effects of a positive shock to charitable donations to the ARC: foreign natural disaster events. We find that although charitable donations to ARC increase by 34.9% in the six weeks following a disaster, political donations decline by 18.8% in the same period. Put differently, each 1% increase in the charitable giving to ARC is accompanied by a 0.53% drop in political donations. At the average county-week–level donations, the implied effect of a $1 increase in charitable giving is a $0.42 decline in political donations. In the second natural experiment, we estimate the effects of a positive shock to political giving: advertisements for political campaigns. Exploiting geographic discontinuities in advertising markets, we find that political advertisements increase political giving, whereas they decrease charitable donations to ARC. Our estimates imply that each 1% increase in the political giving is accompanied by a 0.59% drop in charitable donations to ARC. At the average county-week–level donations, the implied effect of a $1 increase in political giving is a $0.33 decline in charitable donations. The crowding-out elasticities suggest that political giving and charitable giving are relatively close substitutes. We provide a number of robustness checks, and we discuss potential causal mechanisms.

Suggested Citation

  • Pinar Yildirim & Andrei Simonov & Maria Petrova & Ricardo Perez-Truglia, 2024. "Are Political and Charitable Giving Substitutes? Evidence from the United States," Management Science, INFORMS, vol. 70(11), pages 8030-8043, November.
    • Handle: RePEc:inm:ormnsc:v:70:y:2024:i:11:p:8030-8043
    DOI: 10.1287/mnsc.2021.00845
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    Cited by:

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    2. Griffith, Alan & Noonen, Thomas, 2021. "Does Public Campaign Funding Crowd Out Private Donation Activity? Evidence from Seattle's Democracy Voucher Program," SocArXiv 9wtzs, Center for Open Science.
    3. Julia Cagé & Malka Guillot, 2021. "Is Charitable Giving Political? Evidence from Wealth and Income Tax Returns," Working Papers hal-03877993, HAL.
    4. Adena, Maja & Hager, Anselm, 2020. "Does online fundraising increase charitable giving? A nation-wide field experiment on Facebook," Discussion Papers, Research Unit: Economics of Change SP II 2020-302, WZB Berlin Social Science Center.
    5. Asatryan, Zareh & Joulfaian, David, 2022. "Taxes and Business Philanthropy in Armenia," Journal of Economic Behavior & Organization, Elsevier, vol. 200(C), pages 914-930.
    6. Griffith, Alan & Noonen, Thomas, 2022. "The effects of public campaign funding: Evidence from Seattle’s Democracy Voucher program," Journal of Public Economics, Elsevier, vol. 211(C).

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    More about this item

    Keywords

    charitable giving; political contributions; altruism; warm glow; substitution;
    All these keywords.

    JEL classification:

    • D64 - Microeconomics - - Welfare Economics - - - Altruism; Philanthropy; Intergenerational Transfers
    • H84 - Public Economics - - Miscellaneous Issues - - - Disaster Aid

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