DISASTER APPEALS CAN REDUCE PEOPLE’S FUTURE CHARITABLE
DONATIONS
People’s donations to disaster appeals are likely to be higher the more they have given
to charity in the past year – but their future charitable donations might be reduced.
These are among the findings of research by Sarah Brown, Mark Harris and Karl
Taylor, which analyses the charitable donations of nearly 7,000 US households
following the 2004 Indian Ocean tsunami.
Their study, presented at the Royal Economic Society’s 2010 annual conference, finds
that the biggest factor influencing how much households give in response to
unexpected natural disasters is the amount they give to other charities in the previous
year. Excluding one-off disaster appeal donations, the average amount of donations
among households who regularly donate to charity is $2,577, but two in five households
make no donations.
The study also finds that people are more likely to give charitable donations the more
years of education they have, if they are married or cohabiting and if they are in good
health. Men are less generous than women on average, giving around 17% less to the
victims of the tsunami and 34% less to other charitable causes.
This research informs the debate about the effect of high-profile disaster appeals and
whether these campaigns might be harmful to other charities beyond the media
spotlight. It can also help to explain why people with similar incomes give different
amounts to charity.
More…
A plethora of studies in the economic research literature explore why individuals make
contributions to charity. Given the economic significance of such donations and the
extent of government intervention in this area via tax regulation, such interest is not
surprising.
Over the last four decades, research on the economics of charity has focused on the
supply side – that is, individuals’ and households’ decisions about whether to donate to
charity and, if so, how much to donate – with much attention paid to the impact of tax
deductibility on charitable giving.
Our focus also lies on the supply side, exploring charitable donations at the household
(donor) level. Much of the existing research at the donor level focuses on total
contributions made to charity without distinguishing between different recipient causes.
In our empirical analysis, we aim to explore the relationship between donations related
to a natural disaster and donations to other charitable causes. Specifically, we focus on
donations to the victims of the 2004 Indian Ocean tsunami, which occurred on 26
December 2004.
One-off appeals for disaster relief have been recognised in the existing literature as an
important means of raising a large amount of funds from relatively small contributions
made by a large number of individuals.
We use data from the US Panel Study of Income Dynamics (PSID). Due to our focus on
donations for the victims of the tsunami, we restrict ourselves to the 2005 PSID, which
yields a sample for analysis of 6,590 households.
Excluding donations specifically related to the 2004 Indian Ocean tsunami, the average
total value of the amount of donations in the calendar year 2004 is $1,557, with 40% of
households not making any donations. Households are asked about total donations to
charity over the calendar year 2004. The average amount of donations among
households who do donate to charity is $2,577.
Our empirical evidence suggests that donations specifically for the victims of the
tsunami are positively associated with the amount donated to other charitable causes
over the previous calendar year, 1 January 2004 to 31 December 2004.
Other factors positively associated with donations for the victims of the tsunami include:
years of schooling; being married or cohabiting; and being in good health. Men are
found to donate less on average than females. For example, males donate around 17%
less to the victims of the tsunami and 34% less to other charitable causes.
The positive relationship between tsunami donations and previous donations to other
charitable causes exists when we decompose overall charitable donations into different
types of philanthropy, with charitable contributions to caring, needy and religious
organisations having the largest positive association with donations to the victims of the
tsunami.
We also explore the impact of donations to the victims of the tsunami on future
donations to charity (donations to charity made over the period 1 January 2006 to 31
December 2006). Our findings suggest that donations to the victims of the tsunami may
have a small negative association with future donations to charity.
ENDS
‘Modelling Charitable Donations to an Unexpected Natural Disaster: Evidence from the
US Panel Study of Income Dynamics’ by Sarah Brown, Mark Harris and Karl Taylor
Sarah Brown and Karl Taylor, Department of Economics, University of Sheffield
Mark Harris, Department of Econometrics and Business Statistics, Monash University,
Australia
Sarah Brown: sarah.brown@sheffield.ac.uk
Karl Taylor: k.b.taylor@sheffield.ac.uk
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