Competition Among Charities: Field Experimental Evidence from a State Income Tax Credit for Charitable Giving
Donations to charity are widely encouraged by policymakers through targeted taxincentives such as tax creditsfor contributions only to qualifying causes.We use an online field experimentto test how the largest such program, Arizona’s state income tax credit for donations to qualifying charities, affects donation decisionsin a modified dictator game.In the experiment, we randomize whether subjectsreceive detailedinformation about the tax credit programprior to selecting potential recipients and completing the allocation task.We also vary the number of charities that subjects can select asrecipients along with the(tax-credit) qualifying vs. non-qualifyingcomposition of the choice set. We find that average giving is unaffected by the information provision and composition of the choice set. However, we find that subjects direct significantly more funds towards qualifying charities when provided information aboutthe tax program; an effect that is enhanced when subjects select multiple recipients from lists that contain a mixture of qualifying and non-qualifying organizations. Our resultsunderline the importance of including a portfolio of choices when studying the impact of targeted incentivesbecause this makes it possible to identify a central feature of our data: participants "rob Peter" (non-qualifying charities) "to pay Paul" (qualifying charities).
Andrew Young School of Policy Studies, Georgia State University