Impure Altruism and Donations to Public Goods: A Theory of Warm-Glow Giving

When people make donations to privately provided public goods, such as charity, there may be many factors infiuencing their decisions other than altruism. As Olson (1965) noted, 'people are sometimes motivated by a desire to win prestige, respect, friendship, and other social and psychological objectives' (p. 60) or as Becker (1974) observed, 'apparent "charitable" behavior can also be motivated by a desire to avoid scorn of others or to receive social acclaim' (p. 1083). Clearly social pressure, guilt, sympathy, or simply a desire for a 'warm glow' may play important roles in the decisions of agents. While such warm-glow giving has been acknowledged in the literature/ the most common approach has been to assume that preferences depend only on private consumption and the total supply of the public good and not on individual donations per se. Recent research reveals, however, that this ' pure altruism' model lacks predictive power. First, Warr (1982) and Roberts (1984) demonstrate theoretically that government grants should crowd out voluntary gifts dollarfor-dollar,^ a finding that has been extended to subsidies by Bernheim (1986) and Andreoni (1988). However, empirical studies by Abrams and Schmitz (1978, 1984) and Clotfelter (1985) show that crowding out is quite small. Second, Warr (1983) and Bergstrom et al. (1986) show theoretically that the total supply of the public good is independent of the distribution of income, while an empirical study by Hochman and Rodgers (1973) shows that giving to local charities is highly sensitive to the distribution of income within the