Government Growth and Private Contributions to Charity

FRB of St. Louis Working Paper No. 2007-012E

35 Pages Posted: 21 May 2008 Last revised: 17 Jul 2009

See all articles by Thomas A. Garrett

Thomas A. Garrett

Federal Reserve Bank of St. Louis - Research Division

Russell M. Rhine

St. Mary's College of Maryland - Department of Economics

Date Written: July 17, 2009

Abstract

We exploit the time series properties of charitable giving data to provide additional insights into the relationship between charitable contributions and government spending. Our sample period covers the last half of the 20th century, a period marked by increased growth in both government spending and charitable giving. Cointegration tests reveal a significant long-run relationship between several categories of charitable giving and government spending. Granger causality tests are designed to capture any short-run giving and spending relationship, and provide the opportunity to examine whether changes in fundraising efforts by charities influence government spending. Evidence suggests that charitable contributions to education responds quite differently to state and local government education expenditures versus federal government expenditures. We argue that the government spending and charitable giving relationship is dependent upon the source of government revenue, how this revenue is used by institutions of learning, and the rational ignorance of private donors.

Keywords: Government Spending, Charity, Altruism, Crowding Out

JEL Classification: D12, D64, H3

Suggested Citation

Garrett, Thomas A. and Rhine, Russell M., Government Growth and Private Contributions to Charity (July 17, 2009). FRB of St. Louis Working Paper No. 2007-012E, Available at SSRN: https://ssrn.com/abstract=1135323 or http://dx.doi.org/10.2139/ssrn.1135323

Sharon Kay Van Stratton (Contact Author)

Federal Reserve Banks - Federal Reserve Bank of St. Louis ( email )

411 Locust St
Saint Louis, MO 63011
United States

Thomas A. Garrett

Federal Reserve Bank of St. Louis - Research Division ( email )

411 Locust St
Saint Louis, MO 63011
United States

Russell M. Rhine

St. Mary's College of Maryland - Department of Economics ( email )

18952 E. Fisher Road
St. Mary's City, MD 20686-3001
United States

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