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The Social Pressure of Charitable Giving

(Photo: Howard Lake)

We recently heard from John List, the economics-of-charity guru, about the use of lotteries in fund-raising.

Here now is a new List paper, co-authored with Stefano DellaVigna and Ulrike Malmendier, published in the Quarterly Journal of Economics, called “Testing for Altruism and Social Pressure in Charitable Giving.”

As List writes in an e-mail:

Our results indicate that unsolicited campaigns may lead to utility losses equivalent to hundreds of millions of dollars for the givers.  These results have implications for the optimal taxation regime of charitable giving, as they suggest that high-social-pressure solicitations may be welfare-decreasing for the giver.

Although this could be used as an argument to introduce a do-not-solicit or do-not-call list for charities, our findings suggest a simple alternative: to provide an opportunity to the households to sort or, even better, to opt out.

And here’s the abstract:

Every year, 90% of Americans give money to charities. Is such generosity necessarily welfare enhancing for the giver? We present a theoretical framework that distinguishes two types of motivation: individuals like to give, for example, due to altruism or warm glow, and individuals would rather not give but dislike saying no, for example, due to social pressure. We design a door-to-door fund-raiser in which some households are informed about the exact time of solicitation with a flyer on their doorknobs. Thus, they can seek or avoid the fund-raiser. We find that the flyer reduces the share of households opening the door by 9% to 25% and, if the flyer allows checking a Do Not Disturb box, reduces giving by 28% to 42%. The latter decrease is concentrated among donations smaller than $10. These findings suggest that social pressure is an important determinant of door-to-door giving. Combining data from this and a complementary field experiment, we structurally estimate the model. The estimated social pressure cost of saying no to a solicitor is $3.80 for an in-state charity and $1.40 for an out-of-state charity. Our welfare calculations suggest that our door-to-door fund-raising campaigns on average lower the utility of the potential donors.