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The Effect of Tax Price on Donations: Evidence from Canada

Author

Listed:
  • Ross Hickey

    (Melbourne Institute: Applied Economic & Social Research, The University of Melbourne)

  • Brad Minaker

    (University of Guelph)

  • A. Abigail Payne

    (Melbourne Institute: Applied Economic & Social Research, The University of Melbourne)

  • Joanne Roberts

    (Yale-NUS College)

  • Justin Smith

    (Wilfrid Laurier University)

Abstract

Estimating the responsiveness of charitable donations to changes in tax incentives is more than estimating a single number. Giving to charity is unlike normal consumption – it involves supporting the delivery of privately-provided public goods. Age and income may influence how tax incentives to give affect both the decision to give as well as how much to give. Using a large administrative dataset from Canada to estimate the tax price elasticity of donations, we estimate that the tax price elasticity of charitable donations is -1 when it is restricted to be the same for all individuals. Across the income distribution, however, we observe an inverse U-shaped distribution in the elasticity that ranges from -1.4 to -0.18. We also find differences in the elasticity across age groupings, and that for the population the elasticity is driven more through the intensive than extensive margin.

Suggested Citation

  • Ross Hickey & Brad Minaker & A. Abigail Payne & Joanne Roberts & Justin Smith, 2019. "The Effect of Tax Price on Donations: Evidence from Canada," Melbourne Institute Working Paper Series wp2019n08, Melbourne Institute of Applied Economic and Social Research, The University of Melbourne.
    • Handle: RePEc:iae:iaewps:wp2019n08
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    Donations; charity; tax price elasticity;
    All these keywords.

    JEL classification:

    • H31 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Household
    • H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies
    • H40 - Public Economics - - Publicly Provided Goods - - - General

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