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The Unintended Side Effects of Regulating Charities: Donors Penalise Administrative Burden Almost as Much as Overheads

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  • Margaret Samahita
  • Leonhard K. Lades

Abstract

Recent experimental evidence suggests that donors are averse to giving to charities with high overhead ratios. This paper asks whether donors are also averse to giving to charities spending a high share of the donations on unavoidable administrative expenses. The results of an experiment with a nationally representative sample (n = 1, 032) suggest that donors dislike paying for administrative burden almost as much as for overhead. While donors care primarily about how much of their donations are used for program-related services, donors seem to have a weak preference for charities to spend their donations on administrative burden rather than on overheads. Government subsidies that help alleviate charities’ administrative burden can reduce donors’ aversion to give to charities with high administrative expenses. Overall, we show that regulations that aim to increase transparency and accountability in the charity sector can have the unintended side effect of reducing charitable giving.

Suggested Citation

  • Margaret Samahita & Leonhard K. Lades, 2021. "The Unintended Side Effects of Regulating Charities: Donors Penalise Administrative Burden Almost as Much as Overheads," Working Papers 202106, School of Economics, University College Dublin.
    • Handle: RePEc:ucn:wpaper:202106
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    File URL: http://hdl.handle.net/10197/11955
    File Function: First version, 2021
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    References listed on IDEAS

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    1. Abraham, Diya & Corazzini, Luca & Fišar, Miloš & Reggiani, Tommaso, 2023. "Coordinating donations via an intermediary: The destructive effect of a sunk overhead cost," Journal of Economic Behavior & Organization, Elsevier, vol. 211(C), pages 287-304.

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    More about this item

    Keywords

    Charitable giving; Administrative burden; Overhead aversion; Information; Dictator game; Online experiment;
    All these keywords.

    JEL classification:

    • C99 - Mathematical and Quantitative Methods - - Design of Experiments - - - Other
    • D64 - Microeconomics - - Welfare Economics - - - Altruism; Philanthropy; Intergenerational Transfers
    • L31 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Nonprofit Institutions; NGOs; Social Entrepreneurship

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