Education's Gambling Problem: Earmarked Lottery Revenues and Charitable Donations to Education

Abstract

I examine the impact that lotteries introduced to support education have on voluntary contributions to education. State lotteries, and the causes they are introduced to support, are highly publicized. This provides the opportunity to assess whether donors are crowded‐out by government spending of which they are almost certainly aware. Using donor‐level survey data and nonprofits' tax returns, I find that donations to education‐related organizations fall with the introduction of a lottery. This result is driven by donors' response to the new (highly publicized) government revenue source (rather than a decrease in nonprofit fundraising efforts). (JEL D64, H3, H75)

Does government spending crowd out voluntary labor and donations?

“…A study for the US focuses on lottery revenue at the state level from 1989 to 2009 [10]. This revenue contributes to the state's yearly budget and is typically used to provide additional support for public goods, in particular education.…”

“…Financial support by the Fritz Thyssen Foundation is gratefully acknowledged. Version 2 of the article updates the figures and adds new "Key references" [7], [8], [9], [10], [11], [12], [13], [15].…”

Kids or Cash? Exploring Charter School Responses to Declining Government Revenues

“…Many empirical studies (see Borgonovi 2006;Gruber and Hungerman 2007;Heutel 2009Heutel , 2014Hungerman 2005;Khanna, Posnett, and Sandler 1995;Jones 2015;Kingma 1989;Manzoor and Straub 2005;Milton 2017;Okten and Weisbrod 2000;or Ribar and Wilhelm 2002) have analyzed crowding in and out. The majority of the studies find relatively small effect sizes and metaanalysis suggests that crowding in may be a more common finding than crowding out (Lu 2016).…”

“…In this paper, we study voluntary contributions in the form of private donations and grants to charter schools, a special type of public schools. While the literature is extensive on traditional public school districts' revenue sources (e.g., Alm and Sjoquist ; Coleman ; Maloney et al ; McGuire and Papke ; McGuire, Papke, and Reschovsky ; Nelson and Gazley ; or Reschovsky ) and some research have been performed on the impact of donations on traditional public school district funds (e.g., Brunner and Imazeki ; Hansen et al ; Jones ; Milton ; Zimmer, Krop, and Brewer ; or Zimmer et al ), there is a gap in the literature regarding the funding of charter schools. Using data from Texas charter schools, we investigate how changes in state and federal education subsidies affect alternative sources of funding—namely voluntary contributions (donations) to these schools.…”

Can Charitable Donations Compensate for a Reduction in Government Funding? The Role of Information

“…Laboratory experiments provide support for this hypothesis, but the assumption in virtually all of these studies is that people have perfect information about government policies. Thus far, only a handful of studies have examined how charitable giving and volunteering are affected by different levels of knowledge about public policies (de Wit, Bekkers, and Broese van Groenou ; Horne, Johnson, and Van Slyke ; Jones ; Yörük ). Given that behavioral responses to government policies are partly dependent on the available knowledge, we should shift our attention to the information on which social preferences are based.…”