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Do Market Incentives Crowd Out Charitable Giving?

Cary Deck1, Erik O Kimbrough1

  • 1Department of Economics, Simon Fraser University, 8888 University Drive, Burnaby, BC V5A1S6, Canada.

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Summary

Market incentives can increase the supply of charitable donations, particularly for deceased organ donation. However, these financial incentives may disproportionately affect donations from lower-income individuals, potentially crowding out altruistic giving.

Keywords:
Crowding OutMarket IncentivesOrgan DonationPro-Social Behavior

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Area of Science:

  • Behavioral Economics
  • Public Health Policy
  • Medical Ethics

Background:

  • Donations and volunteerism are often viewed as zero-price market transactions.
  • Concerns exist that financial incentives might reduce altruistic behavior.
  • The impact of market incentives on charitable giving, especially large discrete donations, requires direct investigation.

Purpose of the Study:

  • To experimentally investigate the extent to which market incentives affect large, discrete charitable donations.
  • To examine the influence of market incentives in the context of deceased organ donation.
  • To determine if financial incentives crowd out altruistic giving.

Main Methods:

  • Conducted laboratory experiments to simulate market conditions for charitable donations.
  • Focused on a setting relevant to deceased organ donation.
  • Analyzed the impact of market incentives on donation behavior across different socioeconomic groups.

Main Results:

  • Market incentives were found to increase the supply of assets available to those in need.
  • A significant finding is that market incentives disproportionately influence donations from the relatively poor.
  • Evidence suggests a potential crowding-out effect on altruistic giving among certain populations.

Conclusions:

  • While market incentives can boost the availability of resources for charitable causes like organ donation, they have a differential impact based on socioeconomic status.
  • The findings highlight the complex interplay between financial incentives and altruism in charitable giving.
  • Further research is needed to understand and mitigate potential negative consequences on altruistic behavior among vulnerable populations.