Warm Glow, Information, and Ine cient Charitable Giving

I investigate the e ciency consequences of donors who simultaneously give to multiple charities using revealed preference data from a lab experiment in which more than 200 real-world donors decide how to divide a gift between a charity they currently support and a set of international development charities. Most subjects simultaneously give to multiple development charities that have similar mission statements. This is true even when the social bene t of gifts, proxied by the matching rates received by the charities, are not equal. Taking preferences for charities as given, these choices result in substantial ine ciencies. Subjects forfeited social surplus (matching funds) equal to 25% of the value of their gifts. Two-thirds of donors who split their gifts are motivated by warm glow , personal satisfaction derived from the act of giving that leads to a love of variety even among charities that have similar missions. The rest appear to do so because of risk aversion over the social bene t of their gifts, which leads them to diversify their charitable portfolios. Few subjects were willing to pay for information that could have enabled them to increase the social bene t of their gifts. This might help explain why there are so few rigorous evaluations of international development programs: such evaluations are costly to charities and not highly valued by donors. JEL codes: O19, D64, D61, L31 ∗Department of Agricultural and Resource Economics, University of California, Berkeley. I would like to thank my committee members and participants of the Berkeley Development Lunch and ARE Development workshop for extremely helpful discussions of this project; Brenda Naputi of the XLab for technical support; and certainly the Kiwanis, Lions, and Rotary clubs who hosted me as a guest speaker and whose members participated in the experiment. This material is based upon work supported by a National Science Foundation Graduate Research Fellowship. Any opinions, ndings, conclusions, or recommendations expressed in this publication are those of the author and do not necessarily re ect the views of the National Science Foundation. I also gratefully acknowledge funding from the Institute for Business & Economic Research (Dissertation Research Award) and the XLab (Graduate Student Mini-Grant).