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Does the NEA crowd out private charitable contributions to the arts?

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  • Jane K. Dokko

Abstract

In this paper, I extend a theoretical model of the crowding out hypothesis, whereby government contributions to a public good displace private giving, in order to illustrate how dollar-for-dollar crowding out is possible even when individuals regard their own contributions and government grants as imperfect substitutes. I estimate that private charitable contributions to arts organizations increased by 60 cents to a dollar due to a major funding cut to the National Endowment for the Arts (NEA) during the mid-1990s. These increases, however, also coincided with, on average, a 25 cent increase in fund-raising expenditures by arts organizations for every dollar decrease in government grants. The estimate of crowding out found in this paper is large, particularly for a study using a micro-data set. I argue that an appropriate interpretation of an estimate of a crowding out parameter, in general, depends crucially on the context.

Suggested Citation

  • Jane K. Dokko, 2008. "Does the NEA crowd out private charitable contributions to the arts?," Finance and Economics Discussion Series 2008-10, Board of Governors of the Federal Reserve System (U.S.).
    • Handle: RePEc:fip:fedgfe:2008-10
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    References listed on IDEAS

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    Cited by:

    1. Orkhan ISMAYILOV, 2016. "Flypaper Nonprofits: Crowding In And Crowding Out Effects Of Grants On Nonprofit Finance," Regional Science Inquiry, Hellenic Association of Regional Scientists, vol. 0(3), pages 77-87, December.
    2. Lauren Schmitz, 2012. "Do Cultural Tax Districts Buttress Revenue Growth for Budding Arts Organizations?," SCEPA working paper series. 2012-1, Schwartz Center for Economic Policy Analysis (SCEPA), The New School.
    3. Orkhan ISMAYILOV, 2016. "Flypaper Nonprofits: Crowding In And Crowding Out Effects Of Grants On Nonprofit Finance," Regional Science Inquiry, Hellenic Association of Regional Scientists, vol. 0(3), pages 77-87, December.

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    Keywords

    Crowding out (Economics); Public goods;

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