Introduction to the special issue on ‘new directions in understanding philanthropic activities’

Abstract

The papers in this Special Issue contribute to a rich literature on the economics of charitable giving. They address several novel questions covering a wide range of open issues in the philanthropic realm. For example, many of our papers study what works and what does not work for a charitable organization to boost giving money or time. Other papers examine fundraising mechanisms and possible underlying motives shaping donors’ giving behaviour. Our papers combine multiple methodologies, such as theory, observational data as well as laboratory and field experiments, to address these issues. Taken together, our Special Issue offers novel insights and approaches in the field of charitable giving that will be of interest to academics and policymakers alike.

1. A brief overview

While research into philanthropy is old as economics itself, the field has been accelerating at an astonishing speed over the last four decades. Andreoni (2006) charts its much theory-driven rise over 25 years from the 1980s onwards. Since then, it has been above all, the advent of field experiments pushing the field to new frontiers and often inspiring new non-orthodox theoretical models. At the same time, laboratory studies (which radically changed our understanding of economic preferences in the 1980s and 1990s) and empirical studies utilizing observational data remain important pillars of research into philanthropic activities.

In this special issue, we feature 12 new research papers making use of all these methods: our issue comprises four papers that rely on field experiments; four papers that employ laboratory or lab-style online experiments; and four papers that make use of observational data.

Our papers investigate a wide range of open issues in the philanthropic realm. They study the transmission of prosocial preferences from parents to children (Ottoni-Wilhelm, Osili, and Han) and the evolution of such preferences among adolescents (Eckel, Sinha, and Wilson). They study volunteering in two natural settings (Cicognani, Stein, Tonin, and Vlassopoulos; Richter and Reinhard), examine incentives in an artificial real-effort experiment that mirrors volunteering decisions (Cao, Capra, and Su), and examine the relationship between volunteering and donating money (Voorintholt). Donations are examined from four different angles: Jayaraman, Kaiser, and Teirlinck explore the role of natural disasters; Rincke, Cueva, and Cagala study how overhead aversion shapes giving; Späth digs deeper into the drivers of ask avoidance; and Chlaß, Gangadharan, and Jones examine the role of intermediation in the market for charitable projects. Finally, Murphy, Conlin, and Haugstad provide a new study of cause-related marketing (where a fundraising drive is orchestrated by a firm) and Meer and Tajali show how minimum wage laws have been affecting charitable organizations.

There are two main themes that emerge in this special issue. On the one hand, many of our papers are essentially concerned with the question of what works, that is, of what helps a charitable organization to boost giving money or time. On the other hand, several papers are focussed on the mechanism shaping donation behaviour. Often papers combine both which has been a hallmark of field experiments ever since they started penetrating the literature.

Taken together, the papers showcase a field that even after over four decades of acceleration has not yet plateaued. While some questions tackled in the issue have been surfacing in the literature for a long time, for example, the crowding-out question studied in Richter and Reinhard’s field experiment, others like the role of ask avoidance (whereby potential donors try to avoid being asked by a fundraiser) have only been fairly recently discovered. The issue also shows how much can be gained by newly available data sources, such as the platform data utilized in Jayaraman, Kaiser, and Teirlinck, and how it is possible to run clean field experiments in notoriously difficult areas, such as cause-related marketing (Murphy, Conlin, and Haugstad). And the issue shows that theory is still important to improve our understanding of philanthropic behaviours: Voorintholt is an entirely theory-driven paper employing a structural model in its empirical part, and theory features prominently in several of the other studies.

2. Sneak peeks

What if a firm commits to a donation if a consumer’s purchases exceed a certain threshold? This type of cause-related marketing is similar to threshold matching schemes in fundraising (Adena and Huck, 2022) and is studied in Murphy, Conlin, and Haugstad. The setting here is a toy store in Anchorage, Alaska, and the scheme is successful: consumers who would otherwise be just below the threshold increase their spending to reach the threshold. This confirms the observation in Adena and Huck (2022) that the introduction of non-convex budget sets is one of the most promising techniques in fundraising.

In response to the 2004 Indian Ocean tsunami that killed some 280,000 people and left 1.7 million homeless, the international community raised the staggering amount of USD 13.5 billion—it was an unprecedented response to a humanitarian disaster. Jayaraman, Kaiser, and Teirlinck examine data from an online platform where it is possible to observe all donations to all causes for participants. They show what many suspected after the 2004 tsunami. The relief response is very much driven by media coverage. Indeed, charities only fundraise for 4% of all disasters even though the remaining 96% account for 80% of all casualties.

Symbolic rewards have been shown to incentivize work (see Frey and Gallus, 2017), hence the proliferation of honours and awards most of which do not have any prize money attached to them. Do similar symbolic rewards help boost volunteering? In the context of a Citizen Science project, Cicognani, Stein, Tonin, and Vlassopoulos show that they do: those who receive badges for their public profiles if they recruit a certain number of fellow volunteers do indeed recruit higher numbers.

Often there are charitable intermediaries that collect money from donors to distribute it to charities. They usually do not pass the total donation, and the share passed might be actually opaque to donors. This becomes clear when even in revenue fillings many charities report zero fundraising costs. Chlaß, Gangadharan, and Jones show that while donors reduce their giving in reaction to higher donation price (lower share going to the charity) and hidden price, they still might increase their giving in a situation with intermediaries because they want to achieve the same level of good.

Donors not only give because they want to contribute, but often they simply give to preserve their social and self-image. If that is the case, not being asked in the first place might be the potential donor’s first best, and it has been shown that people often are willing to incur costs to avoid an ask (e.g. DellaVigna et al., 2012; Andreoni et al., 2017). In settings where charities engage in repeated fundraising drives, ask avoidance assumes a particularly pronounced role. Do charities want to employ the heightened pressure stemming from repeated interaction or do they want to offer opt-outs? This question is studied by Späth in a laboratory experiment. The upshot is that opt-outs may be beneficial for the charity as those who suffer from ask avoidance appear to be grateful and reciprocal.

Goal setting, whether explicit or implicit, shapes much of our economic activity and has been previously shown to be a non-financial incentive that can promote productivity (e.g. Corgnet et al., 2015). In an experiment with MTurk workers, Cao, Capra, and Su show that self-chosen goals are more ambitious if rewards for meeting the target are paid to charities. It is a case of altruism that boosts ambition.

Gneezy et al. (2014) documented that individuals experience stark aversion to overhead costs in charitable context. What drives this aversion is studied in Rincke, Cueva, and Cagala. Importantly, they find stark differences in the motives and behaviour of donors depending on their type. While strongly committed donors increase their giving in reaction to the increased efficiency of the charity, weakly committed donors reduce their giving when knowing that the impact has increased. Note that the second finding nicely aligns with Chlaß, Gangadharan, and Jones. The implications for charities are important—all-fits-one communication must be the matter of the past, and charities must make better use of the data to personalize or at least segment donors as suggested in Adena and Huck (2022).

Meer and Tajali analyse the impact of minimum wage increases on the non-profit sector in the USA. By utilizing data from the Internal Revenue Service e-filers database from 2011 to 2017, the authors find that state minimum wage changes negatively affect employment and the number of non-profit establishments—an effect driven by states with large statutory minimum wage increases.

Voorintholt asks whether charitable gifts of money and time are substitutes or complements. This is an important question to understand as it allows us to gain a deeper understanding about whether induced changes in charitable giving spill over other pro-social activities, such as volunteering and vice versa. To address this question, Voorintholt proposes an approach focusing on the variation in individuals’ budgets and develops a theoretical model of charitable giving in which individuals are constrained by their available money and time. Using a data set from the Giving in the Netherlands Panel Survey, Voorintholt offers evidence that donating and volunteering are substitutes, but to an insignificant effect. This interesting finding calls for further need to conduct further studies examining this relationship.

Parents play an important role in transmitting social norms to their offspring (Brouwer et al., 2023). But what conditions need to be fulfilled such that the transmission of norms of prosociality happens? Ottoni-Wilhelm, Osili, and Han observe that the key ingredients are observability and frequency. Importantly, they document lack of observability in a survey with parents and children. When parents give, the adolescents have no idea of that fact: approximately half of the samples think that their parents give and the other half think that they do not give which is equal to a coin flip.

While research has over and over documented that older individuals donate more (see Bekkers and Wiepking, 2011, for a review), it has neglected the development in younger individuals. Eckel, Sinha, and Wilson offer a rigorous study of student generosity over time that accounts for cohort effects and experience in experiments. This study robustly shows a decline in generosity over study years, which, together with the established observation of increased generosity over time, suggests a U-shaped relationship.

Our last published paper examines the extent to which changes in public spending crowd in or crowd out voluntary private contributions. Richter and Reinhard focus on the case of nature conservation in The Hague Forest in the Netherlands and report on an experiment that varies whether subjects are informed of current policy plans to decrease public spending, highlighting at the same time the importance of private contributions. Their results demonstrate that mentioning a decrease in governmental spending reduces the amount of money donated. Further analysis shows that this effect can be attributed to those visitors who visit the forest frequently (i.e. more than once a week).

3. Outlook

Can one infer promising directions for future research on philanthropy from this special issue? We believe there are some valuable cues and would suggest three growth areas.

The papers on parental transmission and the evolution of social preferences provide interesting new insights but also highlight how much we do not know about where preferences (and habits) in the philanthropic domain come from. As both studies show, there is not much low-hanging fruit as the analysis of learning and evolution requires patience, time, and ambitious research designs. We are sure, however, that there will be more to come. The payoff appears to be large.

Secondly, we still do not know that much about the inner workings of charitable organizations. Meer and Tajali provide an interesting angle on this by showing how minimum wage laws affect charities, and Chlaß, Gangadharan, and Jones and Rincke, Cueva, and Cagala highlight the importance of the effective price of a charitable good. In most cases, this good is, of course, not money per se. It still needs to be produced and we know next to nothing about how efficient different organizations are in their production technology. Much of the literature and most papers in this volume proceed on the assumption that, overall, donations to charity are a good thing. But this requires some minimum effectiveness in production which is, most of the time, simply assumed.

Finally, the work on disasters hints at the inequity induced by the media. While humanitarian relief always alleviates suffering, it is only the lucky few who receive media attention and help, which is hard to justify by general moral sentiments. We need a better understanding and more public awareness of this phenomenon.

It is an exciting time for research into philanthropic activities, and we wish to thank all the authors, the many referees, and the OEP editorial board and publisher for making this volume possible.

References