NEW YORK, Jan. 18, 2012 /PRNewswire-USNewswire/ -- An article released today by The Quarterly Journal of Economics notes that 90% of Americans give money to charities each year. There is at least one capital campaign to raise $25 million or more underway in virtually every major population center in North America. Smaller capital campaigns are even more numerous, with phone-a-thons, door-to-door drives, and mail solicitations increasing in popularity. Despite the ubiquity of fund-raising, we still have an imperfect understanding of the motivations for giving and the welfare implications for the giver. What moves us to donate? Is such generosity welfare-enhancing for the giver?
The authors of the article, Stefano DellaVigna, John A. List, and Ulrike Malmendier, argue for two types of motivations for giving: the first being altruism, meaning individuals enjoy giving and it gives them a warm glow; and the second being social pressure, meaning individuals may not like giving but do because of the social pressure the solicitor makes them feel. To test the prevalence of these motivations, the authors designed a door-to-door fund-raiser in which some households are informed about the exact time of solicitation with a flyer on their doorknobs. If donations are driven by altruism, potential donors should seek the fund-raiser. If instead donations are driven by social pressure, potential donors should avoid the awkward encounter with the fund-raiser. This field experiment that allowed them to test whether giving is welfare-enhancing or welfare-reducing for the giver. Their findings were thus:
"Overall, the reduced-form estimates indicate that both altruism and social pressure are important determinants of giving in this setting, with stronger evidence for the role of social pressure. The lower frequency of households opening the door after receiving a flyer indicates that households are, on average, trying to avoid solicitors, consistent with social pressure. The social pressure interpretation is also consistent with the lack of donations via mail or Internet."
They find evidence that both altruism and social pressure affect door-to-door charitable giving. The authors estimate that about half of donors would prefer not to be contacted by the fund-raiser either because they would prefer not to donate, or because they would prefer to donate less. As a result, the estimated average welfare effect of the door-to-door campaigns in the sample is negative, that is, the households would have been better off had the solicitors not knocked at their door. While these findings could support an argument to introduce a do-not-solicit or do-not-call list for charities, they can also support a simple alternative: to provide an opportunity to the households to sort or, even better, to opt out.
The authors conjecture their results are likely to extend to other high-pressure approaches to raise money, such as phone-a-thons, charity banquets, auctions, lotteries, and so on, but likely have less explanatory power with lower-pressure approaches, such as mail solicitations.
Article: Testing for Altruism and Social Pressure in Charitable Giving
Journal: The Quarterly Journal of Economics
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SOURCE The Quarterly Journal of Economics