Does Government Spending Really Crowd Out Charitable Contributions? New Time Series Evidence

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

38 Pages Posted: 16 Mar 2007

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: March 2007

Abstract

We exploit the time series properties of charitable giving data to provide additional insights into the crowding out of charitable contributions in response to government spending. We find that the short-run and long-run government spending and charitable giving relationships are quite different - the long run relationship appears to be largely spurious, and estimates of the short-run relationship provide only weak evidence of crowding out. We also find that system estimation can improve upon the efficiency of single equation models used in previous works. Our results support the prestige theory of charitable giving and the rational ignorance of citizens.

Keywords: Government Spending, Charity, Altruism, Crowding Out

JEL Classification: D12, D64, H3

Suggested Citation

Garrett, Thomas A. and Rhine, Russell M., Does Government Spending Really Crowd Out Charitable Contributions? New Time Series Evidence (March 2007). FRB of St. Louis Working Paper No. 2007-012A, Available at SSRN: https://ssrn.com/abstract=970535 or http://dx.doi.org/10.2139/ssrn.970535

Thomas A. Garrett (Contact Author)

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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