Diversity and Charity: An Inverse Relationship?

Our latest Freakonomics Radio on Marketplace podcast, “What Makes Donors Donate?” looks at what works (and what doesn’t) to incentivize people to give. A new NBER working paper studies the relationship between religious and ethnic diversity and charitable donations by looking at Canadian census data and tax records. Authors James Andereoni, Abigail Payne, Justin D. Smith and David Karp argue that the two are inversely related, that is to say that the more diverse a neighborhood, the lower its charitable donations. From the abstract:

A 10 percentage point increase in ethnic diversity reduces donations by 14%, and a 10 percentage point increase in religious diversity reduces donations by 10%. The ethnic diversity effect is driven by a within-group disposition among non-minorities, and is most evident in high income, but low education areas.  The religious diversity effect is driven by a within-group disposition among Catholics, and is concentrated in high income and high education areas.

In terms of ethnic diversity, the same number of households make a donation, but they make a smaller donation.  The authors write:

This effect is mainly driven by non-minorities, who contribute $9 less for each percentage point their group share drops, and Blacks, who contribute $39 less.  The average effect of ethnic diversity on donations occurs most strongly in high income, and in low education neighborhoods.

Our first instinct is to cry causation/correlation foul. But does anyone have thoughts as to why (if this is in fact a causal relationship) diversity might have an adverse impact on charity donations?  


Danielle

I would argue that much more data is necessary before we can conclude that ethnicity is the cause of the disparities in charitable giving such as the income and expenses of the members of these groups. The fact that all of the individuals lived in a "high income" area implies that incomes are comparable, but if we take into account income disparities for similar jobs and savings ratess across ethnicities, this may not be the case. Additionally, if we take into account additional expenses more likely to be bore by minorities, such as supporting family members, a more normalized donation as a percentage of excess earnings would be drastically more comparable.

Munmun Das

Ethnic and religious diversities cause diversity of mind. That's why, it has an impact on charity donations.

Barbara Sterling

It seems pretty obvious to me. Charity can be a result of bonding. Bonding is easier in like groups of people. We talk, exchange ideas and adopt those we appreciate. If my good friend donated to charity, the likelihood I donate is much better. She educates me abut the value of donating and the value of the organization. I notice her commitment and would like to enjoy a bit of her pride and receive a bit of the respect others have for her. So I donate. We have bonded even more. I get the respect of others.

If my neighbor and I do not attend the same church, do not break bread together and discuss nothing but the latest power outage, I will not be influenced by his ideas or even know about his charitable donations.

tucker

Couldn't organizational strength be the mechanism? Churches or other organizations in less diverse neighborhoods could be stronger and strengthen the community norms of charity.

Jens

Interesting topic indeed. Wrote my master thesis on a similar topic; the underlying factors of philanthropy donations. I did however not find any significance in "Ethnic fractionalization" on philanthropy donations. Government Philanthropy did however seem to have a promoting effect on private philanthropy. If you are interested: http://hj.diva-portal.org/smash/record.jsf?pid=diva2:309744

AM

Well, based on soliciting for various charities (door to door about 30 yrs ago) and now via work through umbrella organizations (e.g. United Way), I can say charitable donations predominently come from Caucasians. Same goes for volunteering. Despite huge efforts to engage other communities, ethnics generally donate only to their own narrowly focused charities, helping their own families or their tribe/clan. I completely agree that many support family members back home, but most decline to help anyone outside of this. An Indian born, Canadian raised friend of mine is totally frustrated that she cannot get support from well heeled Indians in Canada to support a charity she has established back in India. Another acquaintance who runs a larger Toronto based charity, says he gets a lot of pressure to expand his board of Directors to minorities but since his criteria is to have someone on the Board requires that they make a large donation, his pool of candidates immediately diminishes to Caucasians.

My explanation of this survey result is: the less Caucasians, the lower the donations. I think they should evaluate the donations associated with non Caucasian, homogenous poplulations (of course, correcting for income). I suspect there will be wildly different levels of donations. The reality is some cultures are very family minded, some community minded and some globally minded. Western charities which typcially do not restrict access based on religion, gender, ethnicity,... are not supported by non Caucasians because they simply do not share the same values.

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