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Distinguishing Transitory and Permanent Price Elasticities of Charitable Giving with Pre-Announced Changes in Tax Law

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Abstract

This paper develops and applies a new estimation technique for distinguishing transitory and permanent price and income elasticities of charitable giving using panel data. Twelve-year individual averages of income and deductions are combined with information on legislated changes in tax schedules, to construct instruments for permanent price and income variation. Unlike the previous literature, pre-announced changes in tax law are used to identify transitory variation, and fixed-effects are used to control for unobserved heterogeneity. The timing of giving is found to be significantly more responsive to tax incentives than is the long-run level of giving.

Suggested Citation

  • Jon Bakija, 2000. "Distinguishing Transitory and Permanent Price Elasticities of Charitable Giving with Pre-Announced Changes in Tax Law," Department of Economics Working Papers 2000-06, Department of Economics, Williams College.
  • Handle: RePEc:wil:wileco:2000-07
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    File URL: https://web.williams.edu/Economics/wp/bakijacharity.pdf
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    1. Ashok S. Rai & Tomas Sjostrom, "undated". "Is Grameen Lending Efficient?," CID Working Papers 40, Center for International Development at Harvard University.
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    Cited by:

    1. Francis Kramarz & Oskar Nordström Skans, 2014. "When Strong Ties are Strong: Networks and Youth Labour Market Entry," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 81(3), pages 1164-1200.
    2. Jonathan Conning & Michael Kevane, 2002. "Why Isn't There More Financial Intermediation in Developing Countries?," WIDER Working Paper Series DP2002-28, World Institute for Development Economic Research (UNU-WIDER).
    3. Kumar Aniket, 2007. "Does Subsidising the Cost of Capital Help the Poorest? An Analysis of Saving Opportunities in Group Lending," Edinburgh School of Economics Discussion Paper Series 140, Edinburgh School of Economics, University of Edinburgh.
    4. Li, Shanjun & Liu, Yanyan & Deininger, Klaus W., 2009. "How Important are Peer Effects in Group Lending? Estimating a Static Game of Incomplete Information," 2009 Annual Meeting, July 26-28, 2009, Milwaukee, Wisconsin 49497, Agricultural and Applied Economics Association.
    5. repec:dgr:rugsom:03e36 is not listed on IDEAS
    6. Simtowe, Franklin & Zeller, Manfred, 2006. "Determinants of Moral Hazard in Microfinance: Empirical Evidence from Joint Liability Lending Programs in Malawi," MPRA Paper 461, University Library of Munich, Germany.
    7. Hoque, Md Mahfuzul & Kummer, Tyge-F. & Yigitbasioglu, Ogan, 2024. "How can blockchain-based lending platforms support microcredit activities in developing countries? An empirical validation of its opportunities and challenges," Technological Forecasting and Social Change, Elsevier, vol. 203(C).
    8. Simtowe, Franklin & Zeller, Manfred & Phiri, Alexander, 2006. "Determinants of Moral hazard in Microfinance: Empirical Evidence from Joint Liability Lending Schemes in Malawi," 2006 Annual Meeting, August 12-18, 2006, Queensland, Australia 25287, International Association of Agricultural Economists.
    9. Kundu, AMIT & MITRA, SURANJANA, 2009. "Determinants Influencing a Rural Household's Preference to Join Individual Liability or Joint Liability Micro Credit Contract Operated by Primary Aagricultural Credit Society," MPRA Paper 21784, University Library of Munich, Germany, revised 10 Oct 2009.
    10. Rafael Gomez & Eric Santor, 2003. "Do Peer Group Members Outperform Individual Borrowers? A Test of Peer Group Lending Using Canadian Micro-Credit Data," Staff Working Papers 03-33, Bank of Canada.
    11. Paal, Beatrix & Wiseman, Thomas, 2011. "Group insurance and lending with endogenous social collateral," Journal of Development Economics, Elsevier, vol. 94(1), pages 30-40, January.
    12. Hermes, Niels & Lensink, Robert & Mehrteab, Habteab T., 2005. "Peer Monitoring, Social Ties and Moral Hazard in Group Lending Programs: Evidence from Eritrea," World Development, Elsevier, vol. 33(1), pages 149-169, January.
    13. Naveen Kumar K, 2012. "Dynamic Incentives in Microfinance Group Lending," SAGE Open, , vol. 2(2), pages 21582440124, April.
    14. Leonardo Becchetti & Fabio Pisani, 2010. "Microfinance, subsidies and local externalities," Small Business Economics, Springer, vol. 34(3), pages 309-321, April.
    15. Abdul Karim, Zulkefly, 2009. "Microfinance and Mechanism Design: The Role of Joint Liability and Cross-Reporting," MPRA Paper 23934, University Library of Munich, Germany, revised 12 Jan 2010.

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    More about this item

    Keywords

    Charitable Donations; Incentive Effects of Taxation; Estimation; Empirical Analysis; Intertemporal Consumer Choice;
    All these keywords.

    JEL classification:

    • H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies
    • H31 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Household
    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making

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