Precautionary savings and the governance of nonprofit organizations

We present a model of nonprofit governance built on two assumptions: (1) organizations wish to hold precautionary savings in order to smooth expenditures; and (2) it is relatively easy for managers to divert these funds for personal use. Hence, donors face a trade off between expenditure smoothing and donation dissipation. We examine the model's predictions using panel data on U.S. nonprofits. We show that organizations in states with poor government oversight have managerial compensation that is more highly correlated with inflows of donations and allocate a smaller percentage of donations to the endowment for future expenditures relative to organizations in strong oversight states.     

The Role of United Charities in Fundraising: The Case of Singapore

Abstract: Theory suggests that a united charity helps to economize on fundraising costs by reducing competition for donations among member charities. However, donors often cannot control the allocation of their donations, and charities may dislike the monitoring of their activities. This paper examines these and other issues relating to the Community Chest of Singapore. The results, based on analysis of financial positions and fundraising costs of a large number of charities, suggest that the Community Chest does possess important fundraising advantages. Thus charities in financial difficulties or in need of funds for additional programs tend to seek membership. However, organizations that value their autonomy and independence, and that are able to achieve low fundraising costs tend to remain as non‐members. Thus a monopoly agency raising funds for all charities in the future is unlikely in the case of Singapore.     

Goodwill bazaar: NGO competition and giving to development

This paper builds a model of competition through fundraising between horizontally differentiated NGOs. NGOs allocate their time resource between working on the project and fundraising, which attracts private donations. If the market size is fixed, the fundraising levels increase with the number of NGOs and the free-entry equilibrium number of NGOs can be larger or smaller than the socially optimal number, depending on the efficiency of the fundraising technology. If the market size is endogenous and NGOs cooperate in attracting new donors, fundraising levels decrease with the number of NGOs and the free-entry equilibrium number of NGOs is smaller than the one that maximizes the welfare of donors and beneficiaries. If NGOs can divert funds for private use, multiple equilibria (with high diversion and no diversion of funds) appear.     

Choosing Your Object of Benevolence: A Field Experiment on Donation Options*

In a large natural field experiment, we explore the effect of providing donors with the opportunity of choosing the target country for their donations. We find that our treatment manipulation affects neither the average donation size nor the response rate. Only a small fraction of donors (3.5 percent) actually choose their object of benevolence. These donors give more than those who do not specify a recipient. However, based on previous donations, we can only provide indicative evidence that this might be a causal effect rather than a mere selection effect.     

The nonprofit sector in international perspective: The case of Sri Lanka

Sri Lanka, a developing country, has a small but growing nonprofit sector that engages in the formation of social overhead and human capital, as well as in more traditional social services. The most active multipurpose organizations combine large foreign monetary donations with domestic donations of volunteer labor. Smaller organizations depend primarily on modest government grants for financial support. Private domestic monetary contributions, unlike in the U. S., play only a minor role. Origins of these nonprofit institutions, motivations of foreign donors and of volunteer labor, interactions with the government, and implications for economic development and social welfare are examined.     

Public financing of health expenditures,insurance, and health outcomes

The effects of public financing of health expenditures, insurance coverage and other factors on health outcomes are examined within health production models estimated using 1960–1992 data across 20 OECD countries. Mortality rates are found to depend on the mix of health care expenditures and the type of health insurance coverage. Increases in the publicly financed share of health expenditures are associated with increases in mortality rates. Increases in inpatient and ambulatory insurance coverage are associated with reduced mortality. The effects of GDP, health expenditures and age structure on mortality are similar to those in previous studies. Tobacco use, alcohol use, fat consumption, female labour force participation, and education levels are also significantly related to overall mortality rates. Increases in income inequality are associated with lower mortality rates, suggesting that the negative relationship between inequality and health outcomes suggested by some previous studies does not remain when a more complete model is estimated. The result that increases in public financing increase mortality rates is robust to a number of changes in specifications and samples. Thus, as countries increase the level of their health expenditures, they may want to avoid increasing the proportion of their expenditures that are publicly financed.     

Help not needed? Optimal host country regulation of expatriate NGO workers

Motivated by interventions in poor countries to increase the use of local labor in foreign nongovernmental organizations (NGOs), we address the behavior of these organizations under host government regulation. We extend existing NGO models by distinguishing between local workers and expatriates. The model covers both NGO monopoly and competition in the market for donations. Assuming that NGOs maximize output, we show that regulations in the form of a quota on the number of expatriates or a work permit fee for foreigners reduces NGO output, but increases employment of locals. The optimal quota is more likely to bind in the market structure generating the highest total fundraising surplus. An optimal work permit fee is equivalent to an optimal quota in both the monopoly and duopoly cases. For both instruments, the optimal tightness of regulation is decreasing in the weight the government attaches to the public good relative to domestic incomes and in the importance of NGO output to the supply of the public good. Aggregate NGO output and the level of the public good produced could be higher with a monopoly NGO.     

Indeterminacy,capital maintenance expenditures and the business cycle

This paper examines how maintenance expenditures affect the occurrence of indeterminacy in a two-sector model economy, motivated by the empirical fact that equipment and structures are maintained and repaired. McGrattan and Schmitz's (1999) survey on ‘Capital and Repair Expenditures’ in Canada indicates that maintenance expenditures account for a substantial fraction of output and new investment. It is shown that the endogenous maintenance expenditures reduce the requirement of the degree of increasing returns to scale to generate sunspot equilibria. In fact, the minimum level of the returns to scale required could be as low as 1.0179. This aspect is important since empirical works such as Basu and Fernald (1997) suggest that returns to scale is close to constant.     

Campaign Spending with Office-Seeking Politicians, Rational Voters, and Multiple Lobbies

I introduce a microfounded model of campaign finance with office-seeking politicians, a continuum of voters, and a large number of heterogeneous lobbies. Lobbies make contributions to politicians according to a common agency framework. Politicians use contributions to finance their electoral expenditures. Voters are not fooled by electoral expenditures: they are influenced in a way that is consistent with the equilibrium behavior of lobbies and politicians. The model is used to: (i) determine the relation between campaign spending and the deviation from the median voter's preferred policy; (ii) show the informational value of lobbies' contributions; (iii) evaluate the welfare implications of restricting campaign spending; and (iv) interpret the empirical finding that campaign expenditures have a very low effect on election outcome. Although in equilibrium advertising provides voters with useful information, under reasonable parameter values, a ban on campaign contributions makes the median voter better off. Journal of Economic Literature Classification Numbers: D72, D82, M37.     

Educational contributions, academic quality, and athletic success

This article examines the role of successful Division I football and basketball programs in motivating alumni and other donors to make charitable educational contributions to U.S. universities. Results from fixed effects analysis of panel data on 87 universities for the period 1986–87 to 1995–96 indicate that year-to-year changes in athletic success have a positive impact on levels of alumni giving, but that other types of donors are not as responsive. Also, long-standing athletic traditions established prior to the sample period appear to generate academic benefits in the form of increased charitable donations from all sources. However, the estimated impact of a successful athletic tradition is relatively weak when compared to the effect of student and faculty quality on educational contributions.     

Identification, screening and stereotyping in labour market discrimination

According to social-psychological research, feelings of uncertainty in decision-making evoke two opposite responses: (i) reduction of uncertainty by information search, leading to less stereotyping of people, and hence less discrimination; (ii) social identification with an ingroup, inducing more reliance on stereotypic perceptions and prejudices, and hence more discrimination against an outgroup. We integrate both responses in a microeconomic model of hiring and pay decisions by an employer. Increasing competition in the product market makes the employer feel more uncertain about his profits, but also raises the opportunity cost of screening expenditures. This elicits substitution of ingroup identification for screening expenditures, and hence enhances discrimination.     

Consumption Effects of Foreign Remittances in Jamaica

The term remittances refers to proceeds from the migration of labor that are sent to aid individuals remaining in the migrants’ home communities. In this paper, we investigate whether remittances alter the consumption pattern of recipient households in Jamaica. We present results from an Engel curve estimation specifically using the Working (1943) approach and a two-part fractional response model with instrumental variables to account for selection bias and endogeneity of remittances. The dependent variables are a subsample of the categories of consumption as defined in the Jamaican Survey of Living Conditions and include expenditures on food, schooling, health, gambling, alcohol and donations. We find that receipt of remittances significantly alters the recipient households’ expenditure allocations relative to other sources of income, although this effect occurs more through the participation decision. Overall, total effects of remittances are largest in the areas of luxury expenditures and home production, and to a lesser extent for education and grocery store purchases. These findings have significant implications for those remitting, those receiving, and governments looking to understand this large flow and less documented source of income.     

A Coordination Game Model of Charitable Giving and Seed Money Effect

If potential donors for a charity project possess the warm‐glow properties in their preferences, we can represent their behavior with a coordination game. Accordingly, we construct a simultaneous incomplete information game model of charitable giving based on a simple global coordination game. We demonstrate that merely by the effect of seed money to shift the threshold requirement of the donations for project success downwards, the proportion of donors and the total amount of donations strictly and continuously increase with the amount of seed money. This result is partially compatible with the field experimental evidence in List and Lucking‐Reiley (2002).     

Family model of contributions to non-profit organizations and labour supply

In this article a model is presented in which the family decides the labour supply of both spouses and their time donations to non-profit organizations. For the estimation, Spanish data was used which showed that family size and pre-school children influence decisions made about time distribution of husband and wife. Women with fewer family responsibilities work longer hours and donate more time, whilst the effect on men is the contrary. Also, monetary donations by the family are directly related to time donations by the spouses.     

A Theoretical Model of the Effects of Public Funding on Saving Decisions by Charitable Nonprofit Service Providers

Why do charitable nonprofit, service‐providing organizations save? What are the tradeoffs between using income to build up cash reserves and serving more clients? Saving may generate income, protect the organization against a drop in donations, and increase the organization's chances of survival. Saving, though, may affect the likelihood that nonprofits receive private and public funding. We model the relationship among private and public income, economic conditions, and nonprofit savings. We find that anticipation of government help during difficult times tends to reduce the amount of saving done by the nonprofit. This effect is strengthened if government officials view unspent donations as indicative of a lack of need. Both these effects provide a strong incentive for nonprofits to spend on current consumption rather than to save for the future, and thus to increase the burden on the public purse.     

THE EFFECT OF FDI ON LOCAL EDUCATION EXPENDITURES: EVIDENCE FROM THE UNITED STATES

The intense competition for foreign direct investment (FDI) by state and local governments within the United States has raised concerns among some that this leads to the underprovision of public services and possibly welfare losses for local communities. Economic analysis of this hypothesis yields mixed results. This paper investigates the impact of FDI on local education expenditures both theoretically and empirically. The theoretical model shows an ambiguous impact of FDI on local expenditures for education. Empirically using US state‐level data from 1991 to 2000 and the system‐GMM estimator that controls for fixed effects, times series issues and endogeneity, I find evidence that FDI is positively correlated with increased expenditures on education.     

中美两国基础研究社会捐赠比较及对我国的启示

鼓励多元化投入基础研究的国家政策频繁出台，使社会捐赠作为基础研究投入来源引起学者普遍关注。美国运用社会资本进行科研捐赠具有多年发展经验，在支持生命科学、数学、物理学等前沿基础研究领域取得较好成效。为考察我国基础研究社会捐赠现状，对中美两国社会捐赠框架、科研投入多元化格局、捐赠激励政策、非营利机构布局及社会捐赠瓶颈等内容进行对比，从增设基础研究捐赠类目、成立基础研究专项基金会、完善基础研究捐赠税收优惠政策和积极吸收社会小额捐款4个方面提出适合我国国情的基础研究社会捐赠政策措施。     

Public investment,taxation, and long-run output in economies with multi-level governments

This paper examines the dynamic effects of taxation and investment on the steady state output level of an economy. A simple neoclassical growth model with different tiers of government is developed. The initial focus is on governments that aim to maximise their citizens' welfare and economic performance by providing consumption goods for private consumption and public capital for private production. It is shown that a long-run per capita output maximising tax rate can be derived and that there also exists an optimal degree of fiscal decentralisation. The analysis then extends to the case where governments attempt instead to maximise their own tax revenue to fund expenditures which do not contribute to the utility of their citizens. Three different cases of taxation arrangement are considered: tax competition, tax sharing, and tax coordination. The modeling shows that intensifying tax competition will lead to an increase in the aggregate tax rate as compared to the cases of sharing and coordination amongst governments. These tax rates are both higher than the long-run per capita output maximising rate that was implied under the welfare maximising government scenario.     

Market structure and corporate charitable donations: some Canadian evidence for 1976 and 1981

The business of business, not charity.

Say eleemosynary its more confusing.

Whatever, as long as we don't given 'em any cash.

Harv Antione, ‘The Buzz Words of Entrepreneurship’

in Apocryphal Northern Tales

This paper investigates the general determinants of corporate charitable donations in Canada and, in particular, the impact of imperfectly-competitive market structure. We utilize a profit-maximizing model and assume that charitable donations occur only if, by performing an advertising/public relations function, they increase revenue; or if, by acting as a fringe benefit, they result in a reduction in wage costs. In this context, because only firms in imperfect markets generate the rents from which donations can be made, we anticipate a positive relationship between donations and a measure of imperfect competition (concentration). The data is a cross-section sample of 38, 3- and 4-digit SIC manufacturing industries pooled for 1976 and 1981. The major findings are that: the results are generally compatible with the predictions of the model; concentration is a significant determinant of donations although non-linear; the cost of giving (the tax rate) is appropriately positive; and there are significant negative relationships for measures of foreign ownership and wage rates.     

The politics of special purpose trust funds

Over the last decades, bilateral donors of foreign aid have increased their use of special purpose trust funds to provide earmarked aid to multilateral organizations. This paper investigates the incentives and consequences underlying this recent shift toward country‐ or theme‐specific funding and away from bilateral and multilateral aid. We propose a game‐theoretic model with multiple principals and a multilateral agent to study how the interaction between donor preferences, voter concerns in the donor country, the voting rules at the multilateral organization, and the presence of special purpose trust funds influences aid allocation. We show that multilateral organizations with majority rules are more likely to receive discretion and thus voluntary core contributions than those with unanimity requirements and that the possibility of earmarking multilateral aid decreases donors’ contributions to the multilateral's discretionary core budget and the amount of bilateral aid. In contrast to much of the literature dealing with issues of delegation and bi‐ and multilateral aid, our model suggests non‐monotonic effects of preference heterogeneity on the choice of aid channel for some parameter combinations when contributions to special purpose trust funds are an option.