Voluntary Giving and Economic Growth: Time Series Evidence for the US

Abstract

Die Dis cus si on Pape rs die nen einer mög lichst schnel len Ver brei tung von neue ren For schungs arbei ten des ZEW. Die Bei trä ge lie gen in allei ni ger Ver ant wor tung der Auto ren und stel len nicht not wen di ger wei se die Mei nung des ZEW dar.Dis cus si on Papers are inten ded to make results of ZEW research prompt ly avai la ble to other eco no mists in order to encou ra ge dis cus si on and sug gesti ons for revi si ons. The aut hors are sole ly respon si ble for the con tents which do not neces sa ri ly repre sent the opi ni on of the ZEW.Download this ZEW Discussion Paper from our ftp server:ftp://ftp.zew.de/pub/zew-docs/dp/dp10075.pdf Non-technical SummaryGiven the substantial consolidation pressure in tax dependent government budgets, voluntary contributions play an increasing role in the financing of activities related to welfare, culture or education. There is hope that voluntary giving may at least partially become a stable substitute for tax financing. Tax revenues are highly sensitive to economic growth and the business cycle. Hence, a first question arises as to which extent voluntary giving is equally sensitive to the business cycle. Insofar it is less elastic compared to taxation it might contribute to a more stable financing of public goods over the business cycle. A second question relates to the long-run impact of trend growth on giving and to the extent to which giving benefits from the augmentation of an economy's economic resources. If the long-run growth elasticity of aggregate giving is large, this result would point to a yielding source of finance whose importance can be expected to grow with an expanding economy.Therefore, this paper analyzes the sensitivity of aggregate giving to both business cycle developments and trend growth. In this respect it contributes to fill a blank spot in the charitable giving literature. The study applies time series modeling which follows approaches developed to analyze the tax revenue-growth-nexus. This cointegration modeling takes account of a possible long-run link between income and giving which may temporarily interfere with cyclical fluctuations. The resulting error correction specification allows disentangling the short-run (business cycle related) from the long-run (potential growth related) income elasticity. These tools are applied to data on US giving for a forty-year period for the aggregate of total giving and for its subcomponents (individual, corporate, foundation giving, and charitable bequests).With tax revenues as a point of reference, US giving constitutes indeed a relatively stable source of revenue. Total giving is characterized by a business cycle volatility which is comparable to the moderate one of indirect taxes. However, this overall finding is composed of the respective sub-components' very different short-run GDP-elasticities. Whereas individual and in particular corporate giving is quite sensitive to cyclical fluctuations, foundation giving and charitable bequests tend to stabilize total giving over the business cyc...

Discussing the intriguing relation between unemployment and giving practices

“…Higher levels of remittances received, a higher GDP per capita, and improved control of corruption reduce the WGI ranking of a country, that is, increasing the likelihood of a higher percentage of respondents assuming generous attitudes. These findings follow those of Licuanan et al (), Beyene (), Heinemann (), Armellini and Basu (), Persson and Tabellini (), and Borck (). Countries with higher levels of domestic savings and northern countries tend to rank as less generous.…”

“…However, we also expect that the level of personal remittances received (as a percentage of GDP) reduces the magnitude of the WGI for a country, which follows Licuanan et al (), Beyene (), and Akkoyunlu (). Recall that, although we must control for the values of real GDP per capita (Armellini & Basu, ; Heinemann, ) and the level of corruption (Borck, ; Persson & Tabellini, ), we do not have prior expectations regarding the signs of the estimated coefficients for these variables.…”

“…However, variables related to a society's level of income or wealth also influence giving behavior. Studies providing clear evidence of this include those by Heinemann (), Armellini and Basu (), and Fonchamnyo (). These studies concluded that giving is affected by cyclical shifts in GDP (Heinemann, ), increasing local income (Armellini & Basu, ; Fonchamnyo, ), and income disparity (Hoffman, ).…”

“…These studies concluded that giving is affected by cyclical shifts in GDP (Heinemann, ), increasing local income (Armellini & Basu, ; Fonchamnyo, ), and income disparity (Hoffman, ). They have also considered testable variables such as GDP per capita (Heinemann, ), national income (Fonchamnyo, ), and the incomes of host countries (Armellini & Basu, ).…”

The Geography of Giving in the Philanthropic Field

“…2 Moreover, conducting geographical studies sheds light on the regional dimension of fundraising, the "philanthropy market," and the formative effect of the community context on philanthropic donor behavior (Wolch & Geiger, 1985;Wolpert & Reiner, 1984). Scholars have found that local contexts and geographical disparities set important conditions for regional variations in philanthropy and giving (Bekkers, 2016;Card, Hallock, & Moretti, 2010;Clerkin, Paarlberg, Christensen, Nesbit, & Tschirhart, 2013;Lengauer & Tödtling, 2010;Wolpert, 1988Wolpert, , 1995 at various geographical scales (Bekkers, 2016, p. 124;Havens & Schervish, 2005;Heinemann, 2010;von Schnurbein & Bethmann, 2010). Cross-national comparison reveals the impact of the political, economic, and social and cultural context on philanthropic giving as well as on the size and scope of the not-for-profit sector (Salamon & Anheier, 1998;Wiepking & Handy, 2015, p. 597) 3 .…”