Do Causes Crowd Each Other Out? Evidence From Tornado Strikes

Does charitable giving respond to new demands, and if so, does the response come at the expense of other charitable causes? To answer these questions we exploit exogenous variation in need arising from the random event of a nearby tornado. We use location fixed effects estimators and examine changes in charitable donations claimed for tax deductions in IRS data on individual income taxes by geographic area. We find that having a tornado causing at least ten injuries in one’s state raises charitable contributions by about 2 percent in the year of the tornado and two years afterwards. We test for heterogeneous responses by tornado severity, which gives measures of local need, finding that higher fatality and injury levels lead to more donations. JEL codes: D64, Q54, L31 ∗University of Illinois, Urbana-Champaign and National Bureau of Economic Research. E-mail: [email protected]. †University of Illinois, Urbana-Champaign. E-mail: [email protected].