The Price Elasticity of Charitable Giving: Toward a Reconciliation of Disparate Literatures

There are independent literatures in economics considering tax-price and match-price incentives for giving. The match-price literature has produced well-identified small price elasticities, but scholars have widely questioned whether these estimates can inform tax policy. The tax-price literature in contrast has produced a large range of estimates. Here, we explore and compare these different incentives. First, we consider tax incentives for giving by focusing on a statelevel tax credit that creates a convex kink. We use traditional, as well as more novel, kink methods to estimate the tax-price elasticity of giving. Second, a subgroup of donors in our data were temporarily offered a match for their gifts, creating an opportunity to compare taxprice and match-price effects for the same group of donors giving to the same organization at the same time. We find the tax-price elasticity is about -.2. The match-price elasticity is essentially the same. Our results thus suggest a small tax-price elasticity, close to the matchprice elasticity, and close to match-price elasticity estimates in the experimental match-price literature. The implication is that in the giving environment we investigate the match-price elasticity is informative for tax policy. JEL codes: H31, D12, D64 The authors thank audiences at the ASSA Meetings, the Advances in Field Experiments Conference, the Science of Philanthropy Initiative, and the Federal Reserve Cleveland Branch for comments. A special thanks to Jeff Rainey at the Indiana Department of Revenue. This research was supported by IU School of Philanthropy Research Grant 23-921-15 (Ottoni-Wilhelm) and the John Templeton Foundation (Hungerman). The authors declare that they have no relevant or material interests that relate to the research described in this paper. Contact information: [email protected] (Hungerman) and [email protected] (Ottoni-Wilhelm).