Discussion paper / School of Business & Economics ; 2010/30 : Economics
Charitable giving; crowding out; price and income elasticity; censored quantile regression; income tax return data
336 Public finance
Governmental activities in welfare states influence private charitable giving predominantly in two ways: (1) government spending on the provision of public goods may cause crowding out of private charitable contributions; and (2) tax incentives may boost private charitable giving.
For a rich sample of German income tax returns, we estimate elasticities of charitable giving regarding tax incentives, income and governmental spending. Using censored quantile regression, we are able to derive results for different points of the underlying distribution of charitable giving. Assuming a world with impure altruism (Andreoni 1990), we find evidence for impurely altruistic giving behaviour. Taking crowding out into account, tax deductibility of charitable giving suffices to foster private giving to offset foregone tax revenues.
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