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The Signaling Role of Charitable Contributions by Businesses: A Tax Policy Perspective

Author

Listed:
  • Tomer Blumkin
  • Yoram Margalioth
  • Efraim Sadka
  • Adi Sharoni

Abstract

Empirical evidence suggests that charitable contributions to public goods by businesses may be driven not only by the familiar warm glow of giving motive but also as a means for businesses to signal high product quality. Building on this finding, we present an analytical framework that demonstrates that the optimal degree of subsidization should decrease with the extent to which the signal is informative and may even turn into a tax when the signal is sufficiently strong.

Suggested Citation

  • Tomer Blumkin & Yoram Margalioth & Efraim Sadka & Adi Sharoni, 2022. "The Signaling Role of Charitable Contributions by Businesses: A Tax Policy Perspective," American Law and Economics Review, American Law and Economics Association, vol. 24(1), pages 87-115.
    • Handle: RePEc:oup:amlawe:v:24:y:2022:i:1:p:87-115.
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    File URL: http://hdl.handle.net/10.1093/aler/ahab013
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    More about this item

    Keywords

    H2; H4; K3;
    All these keywords.

    JEL classification:

    • H2 - Public Economics - - Taxation, Subsidies, and Revenue
    • H4 - Public Economics - - Publicly Provided Goods
    • K3 - Law and Economics - - Other Substantive Areas of Law

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