Testing Motives for Charitable Giving: A Revealed-Preference Methodology with Experimental Evidence

43 Pages Posted: 4 May 2012 Last revised: 7 Apr 2021

See all articles by Rahul Deb

Rahul Deb

University of Toronto

Robert S. Gazzale

University of Toronto - Department of Economics; Williams College - Department of Economics

Matthew J. Kotchen

Yale University; National Bureau of Economic Research (NBER)

Date Written: May 2012

Abstract

A large economics literature seeks to understand the reasons why individuals make charitable contributions. Fundamental features of most models of charitable giving are the inclusion of externalities induced by other agents and the Lancasterian characteristics approach to specifying utility functions. This paper develops a general, revealed-preference methodology for testing a variety of preference structures that allow for both externalities and characteristics. The tests are simple linear programs that are transparent, computationally efficient, and straightforward to implement. We show how the technique applies to standard models of privately provided public goods and novel models that account for social comparisons based on relative consumption and donations among individuals. We also conduct an original experiment that enables nonparametric tests of many models on a single data set. The results provide the first revealed-preference evidence on the importance of social comparisons when individuals make charitable contributions. Models that include preferences for either relative consumption or donations yield greater explanatory power than the standard model of impure altruism.

Suggested Citation

Deb, Rahul and Gazzale, Robert S. and Kotchen, Matthew J., Testing Motives for Charitable Giving: A Revealed-Preference Methodology with Experimental Evidence (May 2012). NBER Working Paper No. w18029, Available at SSRN: https://ssrn.com/abstract=2050821

Rahul Deb (Contact Author)

University of Toronto ( email )

Toronto, Ontario M5S 3G8
Canada

HOME PAGE: http://www.economics.utoronto.ca/debrahul/

Robert S. Gazzale

University of Toronto - Department of Economics ( email )

150 St. George Street
Toronto, Ontario M5S 3G7
Canada
416.978.2123 (Phone)

HOME PAGE: http://www.economics.utoronto.ca/gazzale/

Williams College - Department of Economics ( email )

24 Hopkins Hall Drive
Williamstown, MA 01267
United States

Matthew J. Kotchen

Yale University ( email )

New Haven, CT 06520
United States

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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