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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?