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Charitable Giving as a Mixed Public/Private Good: Implications for Tax Policy

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  • Richard Steinberg

Abstract

This is an analysis of the effect of tax changes on charitable giving in a model in which donors possess both private and public good motivations. In Nash equilibrium, donors respond both to changes in taxes and to induced responses by other donors. The aggregate change in donations is smaller than it would be in the pure private model by a factor involving the extent of crowdout of one's own donations by others’ giving. The direction and magnitude of crowdout depends on the relative importance of the public and private motivations, the Hicksian relation between the two (substitutes or complements), the extent of over- or undersupply of the public good, and the income elasticity of demand for the public good.

Suggested Citation

  • Richard Steinberg, 1986. "Charitable Giving as a Mixed Public/Private Good: Implications for Tax Policy," Public Finance Review, , vol. 14(4), pages 415-431, October.
    • Handle: RePEc:sae:pubfin:v:14:y:1986:i:4:p:415-431
    DOI: 10.1177/109114218601400403
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    References listed on IDEAS

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    2. Hamlett, Cathy A., 1987. "Private provision of local rural roads," ISU General Staff Papers 198701010800009541, Iowa State University, Department of Economics.
    3. Serge-Christophe Kolm, 2008. "Paradoxes of the War on Poverty: Warm-Glows and Efficiency," IDEP Working Papers 0807, Institut d'economie publique (IDEP), Marseille, France, revised 18 Nov 2008.
    4. Romano, Richard & Yildirim, Huseyin, 2001. "Why charities announce donations: a positive perspective," Journal of Public Economics, Elsevier, vol. 81(3), pages 423-447, September.

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