Institutions, motivations and public goods: An experimental test of motivational crowding

Contributions to public goods can be motivated by intrinsic factors such as warm glow altruism and fairness, as well as extrinsic incentives such as sanctions and payments. However, psychological studies suggest that formal extrinsic incentives may crowd out intrinsic motivations. In an experimental study of individual contributions to a public good we find that suasion crowded in voluntary contributions, while an extrinsic incentive in the form of a regulation led to crowding out. This has implications for the design of public policy where ranges of motivations are present.     

Intergenerational Transfer of Human Capital and Optimal Education Policy

We study the design of education policies (subsidies and public education) when parents' investment in education is motivated by warm‐glow altruism and determines the probability that a child has a high ability. The optimal subsidy is not necessarily positive. It is determined by two conflicting terms: a Pigouvian term (warm‐glow altruists do not properly account for the impact of education on future generations) and a “paternalistic” effect (the warm‐glow term may not be fully included in social welfare). Finally, total crowding out of private expenditure (for one of the types) by public education may be desirable.     

Testing for altruism and social pressure in charitable giving

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.     

An experimental test of warm glow giving

This paper reports the results of an experimental test of the warm glow hypothesis. A participant is presented with the opportunity to contribute from her own endowment to a charity of choice. The experiment is designed so that a pure altruist has no incentive to donate. The amount the designated charity will receive is preset; any contribution by the participant crowds out dollar-for-dollar giving by the proctor. We find that participants, on average, donated 20% of their endowments and that approximately 57% of the participants made a donation.     

Revealed preferences and aspirations in warm glow theory

In warm glow models, an agent may prefer one alternative but aspire to choose another. The agent chooses her aspiration if she gets a sufficiently large warm glow payoff for acting as she aspires. This basic framework is widely used in models of turnout in elections and contributions to public goods, but is often criticized for being ad hoc. In this paper, we provide choice-theoretic foundations for warm glow theory. We characterize the empirical content of warm glow theory, show how to infer the core elements of the model from data and show that it is possible to predict behavior even when preferences and aspirations are not revealed. Our results provide support for assumptions often made in the literature and suggest new applications for warm glow models.     

Crowd-out and diversity

Research has shown that altruism is lower in diverse communities. Can this phenomenon be counteracted by government intervention? To answer this question, this paper introduces diversity to the canonical model of “warm glow” giving. Diversity may have two effects on incentives: it may attenuate individuals' altruistic preferences for public goods, and it may “cool off” the warm glow that individuals get from voluntarism. Either of these effects leads to diverse communities having lower levels of public goods, consistent with prior research. However, these effects have opposite implications for the efficacy of government intervention. I then empirically investigate whether government intervention is more effective in diverse communities. For identification, I exploit the Supreme Court-mandated 1991 expansion of the SSI program. Using a new dataset of United Methodist churches from 1984 to 2000, the results show that the expansion of SSI crowded-out charitable spending by churches. The crowd-out estimate for the average church is reasonably large, but this masks significant differences in crowd-out between communities. Crowd-out occurred almost entirely in relatively homogeneous communities; there is only modest evidence of crowd-out in racially diverse communities. Thus diverse communities, while having the lowest levels of altruism, are in this instance the most amenable to government intervention.     

On the relation between ecosystem services,intrinsic value,existence value and economic valuation

Various attempts have been made to amalgamate the concepts of intrinsic value and ecosystem services, often with a stop-over at the economic concept of existence value. These attempts are based on a confusion of concepts, however. In this article, two types of non-use values are distinguished: warm glow value, related to the satisfaction people may derive from altruism towards nature, and existence value, related to the satisfaction people may derive from the mere knowledge that nature exists and originating in the human need for self-transcendence. As benefits to humans, warm glow and existence values can be considered ecosystem services. Neither warm glow value nor existence value represents benefits to nature itself, however. Intrinsic value lies outside the scope of the wide palette of ecosystem services.Although the concept of ecosystem services does not cover benefits to nature and the intrinsic value of such benefits, intrinsic value is not necessarily incompatible with economic valuation. Although a deontological ethics does not allow economic valuation of nature as an end in itself, consequentialism does. In consequentialism, however, intrinsic value is not attributed to nature itself, but to benefits to nature. These benefits can be economically valued on the basis of benefit transfer.     

Trust,ability‐to‐pay,and charitable giving

In the literature on privately provided public goods, altruism has been motivated by what contributions can accomplish (public goods philanthropy), by the pleasure of giving (warm‐glow philanthropy), or by the desire to personally make a difference (impact philanthropy). Underlying these motives is the idea that individuals trust that their donations reach their goal. We revisit these models but allow for distrust in the institutional structures involved. An important result we derive is that trust considerations determine whether crowding out is less or more than complete, and we thus open up possibilities in terms of the extent of crowding out not currently available. We also model socially motivated philanthropy when income‐heterogeneous donors take trust and ability‐to‐pay into account. With ability‐to‐pay in social motivation, an important result we obtain is that low‐income donors may contribute more than high‐income donors (in both absolute and percentage‐of‐income terms), giving a potential theoretical foundation to the frequently observed “U‐shaped” pattern of giving.     

Effects of Expected Effort on Females in the Labor Market

We introduce expectations regarding the amount of exerted effort by males and females into the “standard” labor market equilibrium. Using a theoretical model, we show that the gender wage gap increases when the expected effect is incorporated into the model. Based on a survey, we find that there are inaccurate expectations regarding the amount effort exerted by males and females. We argue that biased expectations lead to paying females lower wages and a higher gender wage gap than should be expected on the basis of effort exerted. We suggest marketing females' efforts as a policy tool to counteract these biased expectations.     

Crowdfunding and social influence: an empirical investigation

The literature so far provides no in-depth investigation of the determinants of decisions to contribute to crowdfunding platforms. The present article draws on work measuring the decisions and prosocial behaviours of individuals in relation to public goods, and uses survey data on crowdfunding behaviour. We surveyed an original sample of individuals in France to explore individual decisions and amounts of funding chosen to support a creative project. We show that in non-equity crowdfunding contributing money is associated with altruism. Our findings suggest that the ‘warm glow’ effect influences the level of the contribution; we show also those monetary incentives could ‘crowd out’ the decisions to contribute of crowdfunders. Our study has some implications for business strategy since understanding why people contribute adds to our knowledge about the incentives that might encourage them to increase their contributions, and allows predictions about how changes to how crowdfunding platforms are managed might affect individual incentives to give.     

Private Benefits,Warm Glow,and Reputation in the Free and Open Source Software Production Model

A great deal of production and consumption behavior takes place in the context of social organizations that seem to fall outside of the traditional paradigm of profit/utility maximization. These organizations are voluntary in nature and rely on contributions from members to achieve their objectives. Examples include the Linux operating system and other FOSS projects, political movements, churches and religious groups, Habitat for Humanity, and similar charitable organizations. In this paper, we consider a world containing agents with heterogeneous abilities who may voluntarily choose to make effort contributions to one or more different public projects. Agents are motivated by a desire to be seen as significant contributors to important and valuable projects, the warm glow from the act of contributing, and a desire to directly enjoy the benefits of projects when complete. We find that contributions from others can be either strategic complements or substitutes. We show that Nash equilibria exist and study how agents’ abilities and project quality affect the equilibrium levels of contributions.     

A Core‐Equilibrium Convergence in a Public Goods Economy

This paper shows a core‐equilibrium convergence in a public goods economy where consumers' preferences display warm glow effects. We demonstrate that if each consumer becomes satiated to other consumers' provision, then as the economy grows large the core shrinks to the set of Edgeworth allocations. Moreover, we show that an Edgeworth allocation can be decentralized as a warm glow equilibrium.     

Envy and Altruism: Contrasting Bivariate and Univariate Prospect Preferences

We compare prospect ordering with and without envy and altruism. We find that envy can induce a violation of the univariate first‐degree stochastic dominance (FSD), and thus a violation of the classic expected utility monotonicity axiom. Surprisingly, altruism can also violate FSD preferences. The intuitive explanation of the result in the case of altruism hinges on the sign of the mixed derivative of the bivariate preference: the individual might prefer a certain correlation between her wealth and her peer group's wealth, and is therefore willing to violate FSD as long as the outcomes of the two parties are ordered according to her preferences. When investments are considered, envy and altruism can distort not only preferences but also actual choices.     

Psychology at work

We compare three wage–effort psychological games. In the first game, the agent’s motivation hinges on a degree of altruism influenced by the surprise generated by the principal’s wage offer. The agent works harder when the wage is greater than expected and vice versa when the wage is smaller than expected. Consistent equilibrium beliefs oblige the principal to randomize in order to surprise the agent, which results in the principal being worse off than if she were dealing with an unemotional agent. We then consider an intention-based reciprocity model and a model of guilt aversion. We find that guilt aversion may potentially yield the best outcome for the principal.     

What motivates common pool resource users? Experimental evidence from the field

This paper develops and tests several models of pure Nash strategies of individuals who extract from a common pool resource when they are motivated by a combination of self-interest and preferences for altruism, reciprocity, inequity aversion, or conformity. Using data from experiments conducted in three regions of Colombia that depend critically on a local fishery, we test whether an econometric summary of the subjects’ pure Nash strategies is consistent with one or more of these models. We find that a model that balances self-interest with a strong preference for conformity best describes average strategies.     

Migration decisions, expected remittances, and altruism

We investigate the effects of altruism on migration decisions by the potential migrant as well as the effects of altruism on remittances by the migrant to clarify how altruism affects remittances that the household in the home country will receive, i.e., expected remittances. Previous studies did not pay adequate attention to the effects of altruism on migration decisions of the potential migrant when examining the effects of altruism on remittances that will be sent from aboard. We find that if migration does not incur any costs, the potential migrant always migrates, and altruism increases expected remittances monotonically. On the other hand, if migration incurs costs, the potential migrant does not necessarily migrate, and the potential migrant with a higher degree of altruism is less likely to migrate. As a result, with migration costs, altruism may decrease expected remittances. Therefore, altruism does not increase expected remittances monotonically. Our results falsify the usual assumption of monotonicity regarding the effects of altruism on remittances.     

Mixed feelings: Theories of and evidence on giving

This paper examines possible motives and institutional factors that impact giving. Specifically, I consider alternative theories parallel to dictator experiments that generate evidence on both allocation decisions and their effect on feelings. A number of new empirical findings as well as new interpretations for previously reported findings result. A novel test distinguishes warm glow from impure altruism and rules out the former as the sole motive for giving. Very generous donations to charities that aid the needy (with modal gifts of the entire dictator's stakes) cannot be attributed to familiarity with the charities. A charity that offers a matching grant increases its revenues by drawing donors and donations away from one that does not, although aggregate charitable donations do not rise. Additional results on emotions paint a picture of “mixed feelings:” generosity creates good feelings when the recipients are charities and bad feelings when they are fellow students. No group of dictators, however, feels better, on average, than a control group that is given no opportunity to donate. I propose a simple model that accounts for these results on allocation behavior and feelings by incorporating elements of two approaches, unconditional altruism and social preference theories, that to date have mostly evolved independently. A critical feature of this model is the social norm, and the results of the experiments corroborate the theory in the context of two norms of distributive justice that are important to real world giving: equity and need.     

It pays to do good,but not to do more good than it pays: A note on the survival of altruism

Recently Becker and Hirshleifer have attempted to explain the survival of altruism. Altruism ‘pays’ in their framework because it permits mutual cooperation or exchange to take place. This paper shows that these arguments are invalid. This case is that in any environment where altruism pays there is always an egoistic strategy called cooperation egoism — which yields an even higher return. In equilibrium, this will be anticipated so that, while altruism may pay off in a disequilibrium situation, in equilibrium egoism and not altruism has survival value.     

Using experimental economics to measure the effects of a natural educational experiment on altruism

Economic research examining how educational intervention programs affect primary and secondary schooling focuses largely on test scores although the interventions can affect many other outcomes. This paper examines how an educational intervention, a voucher program, affected students' altruism. The voucher program used a lottery to allocate scholarships among low-income applicant families with children in K-8th grade. By exploiting the lottery to identify the voucher effects, and using experimental economic methods, we measure the effects of the intervention on children's altruism. We also measure the voucher program's effects on parents' altruism and several academic outcomes including test scores. We find that the educational intervention positively affects students' altruism towards charitable organizations but not towards their peers. We fail to find statistically significant effects of the vouchers on parents' altruism or test scores.     

Trends in Disaggregated Import and Export Prices in Europe: Implications for the Trade and Wages Debate

We consider carefully the evidence from traded prices (as proxied by unit values) concerning the transmission of the effects of globalisation to domestic labour markets. Using standard index number techniques we decompose changes in sectoral import and export unit values into movements due to changes in pure prices of the initial bundle of goods imported or exported and changes due to upgrading of that bundle. Looking at the imports of selected European countries of textiles, clothing and footwear relative to engineering products we find evidence of strongly falling pure prices of the unskilled intensive products relative to the skilled products in the 1980s. This reinforces the view that import prices can capture the impact of globalisation in terms of falling relative prices for products produced with the intensive use of unskilled labour. However, the trends are not common across all the unskilled sectors; footwear is clearly an exception. In the absence of detailed domestic data, we look for reactions by domestic firms to increased import competition in movements in the price and composition of exports. We find evidence of stiff price competition from imports being associated with similar movements in export prices and no support for the view that import competition from low–wage countries has led to upgrading of the quality of exports.