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Sensitivity of Charitable Giving to Realized Income Changes: Evidence from Military Bonuses and the Combined Federal Campaign

Author

Listed:
  • Wojtaszek, Carl J.

    (United States Military Academy)

  • Kofoed, Michael S.

    (University of Tennessee)

Abstract

The permanent income hypothesis states that agents perfectly smooth consumption given a large, anticipated shock to income. Testing these implications is difficult given the endogenous nature of income and payment timing. We leverage exogenous variation in military bonus size and timing matched with donations from a large workplace charitable drive where soldiers contribute via payroll deductions during a fixed open enrollment period. Our findings suggest that soldiers are 5 to 10 percent more likely to contribute if they receive their bonus during the open enrollment period. We show that soldiers smooth donations more with age and increased bonus experience.

Suggested Citation

  • Wojtaszek, Carl J. & Kofoed, Michael S., 2021. "Sensitivity of Charitable Giving to Realized Income Changes: Evidence from Military Bonuses and the Combined Federal Campaign," IZA Discussion Papers 14955, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp14955
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    More about this item

    Keywords

    charitable giving; altruism; income shocks; permanent income hypothesis;
    All these keywords.

    JEL classification:

    • D9 - Microeconomics - - Micro-Based Behavioral Economics
    • D64 - Microeconomics - - Welfare Economics - - - Altruism; Philanthropy; Intergenerational Transfers
    • H31 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Household

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