Making an impact? The relevance of information on aid effectiveness for charitable giving. A laboratory experiment

Metzger, Laura; Günther, Isabel

doi:10.1016/j.jdeveco.2018.08.015

Cited by 54 publications

(33 citation statements)

References 38 publications

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“…That said, laboratory and online experiments are regularly criticized for suffering from low external validity because they oftentimes create artificial settings that reduce complexity of real-life decision-making. Despite somewhat neglecting the context in which real-life giving occurs, scholars have nevertheless in recent years embraced experimental method in research on giving determinants (Adena & Huck, 2019; Karlan & Wood, 2017; Metzger & Günther, 2019; Newman et al, 2019). As noted by Kim and Van Ryzin (2014), one advantage of using experimental research designs is that the careful manipulation of an independent variable in a controlled environment increases the internal validity of the study by being “especially strong studies for demonstrating causal relationships” (p. 913).…”

Section: Background and Prior Literaturementioning

confidence: 99%

“…This stream of experimental studies has grown significantly over the past years and has delivered three key insights. First, experimental studies provide compelling evidence that donors base their giving decisions on overhead ratios once confronted with financial data from more than one organization (Buchheit & Parsons, 2006; Gneezy et al, 2014; Metzger & Günther, 2019; Portillo & Stinn, 2018; Stout, 2001). Within this strand of the literature only McDowell et al (2013) find no statistical evidence that participants integrate financial information into their giving decisions.…”

Section: Background and Prior Literaturementioning

confidence: 99%

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If Someone Else Pays for Overhead, Do Donors Still Care?

Charles

Sloan

Schubert

2020

The American Review of Public Administration

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To better evaluate the effectiveness of overhead-free donations on giving behavior, we seek to further investigate the robustness of the findings from Gneezy et al. using a nonstudent population. In an online experiment, we test whether (a) the level of overhead costs affects giving decisions and whether (b) overhead aversion disappears once donors are informed that an anonymous donor has already covered all overhead costs. Results show that donations decrease as overhead spending increases when donors have to pay for overhead. However, unlike the original article, we find mixed results when someone else covered overhead costs. Participants exposed to a nonprofit with a 33% overhead ratio where overhead was already covered still displayed overhead aversion. However, this aversion disappeared at a high overhead ratio of 67%. The overall results remain unchanged after controlling for demographics. Our results hold important implications for nonprofit organizations who must find a careful balance between appealing to donors for short-term financial gain and addressing the need to alter skewed donor expectations toward financial efficiency in the long run.

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Section: Background and Prior Literaturementioning

confidence: 99%

Section: Background and Prior Literaturementioning

confidence: 99%

If Someone Else Pays for Overhead, Do Donors Still Care?

Charles

Sloan

Schubert

2020

The American Review of Public Administration

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“…Some scholars argue that donors should not care about overhead ratios because they present donors with little useful information (Bowman, 2006; Meer, 2017; Steinberg, 1986). However, prior studies find that donors negatively respond to charities with high overhead (Bowman, 2006; Gneezy et al, 2014; Metzger & Günther, 2019; Portillo & Stinn, 2018; Tinkelman & Mankaney, 2007). A recent survey from Grey Matter Research reports that nearly 60% of American donors believe that charities spend too much on overhead; donors have increasingly demanding expectations for what constitutes a reasonable overhead ratio, dropping from an average of 22% in 2012 to 19% in 2018 (Grey Matter Research & Op4G, 2018).…”

Section: Introductionmentioning

confidence: 96%

Is “Overhead” A Tainted Word? A Survey Experiment Exploring Framing Effects of Nonprofit Overhead on Donor Decision

Daniel

2020

Nonprofit and Voluntary Sector Quarterly

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Nonprofit overhead ratios (i.e., proportion of funds spent on fundraising and/or management) have long been used as a proxy for nonprofit efficiency. Prior studies find that donors negatively respond to charities with higher overhead. Using a survey experiment, we explore whether providing different types of information about overhead alleviates this donor aversion. When asked to choose between two organizations as donation recipients, donors preferred the organization with lower overhead. However, when presented with information that described the purpose of higher overhead as building long-term organizational capacity, an increased proportion of donors chose to give to the organization with higher overhead. Omitting the word “overhead” further increased the proportion of donors choosing the organization with higher overhead. This study adds to our understanding of overhead aversion and has practical implications for nonprofits that rely on voluntary private contributions to achieve their missions.

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“…Second, Berman et al (2018) finds stronger shifts in donations from information about the cause of a charity than from information about its effectiveness. Third, Metzger and Günther (2019) finds fairly low demand for information about quality relative to demand for information about administrative expenses. However, providing information on quality to people who want it does shift their donations towards the organizations that are reported as more effective.…”

Section: Introductionmentioning

confidence: 95%

How can Bill and Melinda Gates increase other people's donations to fund public goods?

Karlan

List

2020

Journal of Public Economics

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We develop a simple theory which formally describes how charities can resolve the information asymmetry problems faced by small donors by working with large donors to generate quality signals. To test the model, we conducted two large-scale natural field experiments. In the first experiment, a charity focusing on poverty reduction solicited donations from prior donors and either announced a matching grant from the Bill and Melinda Gates Foundation, or made no mention of a match. In the second field experiment, the same charity sent direct mail solicitations to individuals who had not previously donated to the charity, and tested whether naming the Bill and Melinda Gates Foundation as the matching donor was more effective than not identifying the name of the matching donor. The first experiment demonstrates that the matching grant condition generates more and larger donations relative to no match. The second experiment shows that providing a credible quality signal by identifying the matching donor generates even more and larger donations than not naming the matching donor. Importantly, the treatment effects persist long after the matching period, and the quality signal is quite heterogeneous-the Gates' effect is much larger for prospective donors who had a record of giving to "poverty-oriented" charities. These two pieces of evidence support our model of quality signals as a key mechanism through which matching gifts inspire donors to give.

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Making an impact? The relevance of information on aid effectiveness for charitable giving. A laboratory experiment

Cited by 54 publications

References 38 publications

If Someone Else Pays for Overhead, Do Donors Still Care?

If Someone Else Pays for Overhead, Do Donors Still Care?

Is “Overhead” A Tainted Word? A Survey Experiment Exploring Framing Effects of Nonprofit Overhead on Donor Decision

How can Bill and Melinda Gates increase other people's donations to fund public goods?

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