Does the NEA Crowd Out Private Charitable Contributions to the Arts?

47 Pages Posted: 15 Jan 2009

See all articles by Jane Dokko

Jane Dokko

Federal Reserve Bank of Chicago

Date Written: March 1, 2008

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.

Keywords: Crowding out, charitable contributions, public goods

JEL Classification: D120, D210, H110, H400, H490

Suggested Citation

Dokko, Jane, Does the NEA Crowd Out Private Charitable Contributions to the Arts? (March 1, 2008). FEDS Working Paper No. 2008-10, Available at SSRN: https://ssrn.com/abstract=1327111 or http://dx.doi.org/10.2139/ssrn.1327111

Jane Dokko (Contact Author)

Federal Reserve Bank of Chicago ( email )

230 South LaSalle Street
Chicago, IL 60604
United States

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