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What We Have Learned

"One fact that has emerged in modern societies is that people help others. Whether it is donating a few dollars to help feed the poor or volunteering time to help rebuild someone's life after a natural disaster, people around the globe commonly lend a hand"

- John List and Michael Price, Charitable Giving Around the World: Thoughts on How to Expand the Pie.
Where do donations come from

We look to the World Giving Index, which ranks 153 countries based on charitable giving behavior of their citizens, to learn more about giving patterns. We find:

  • The USA ranks fifth in charitable giving world-wide, following closely Australia, New Zealand, Ireland and Canada. 
  • Comparing continents, Australasia and North America are two of the most generous regions. Least generous - Central and Eastern Europe, Southern Asia, and Eastern Asia.  
  • In the US, charitable donations arise from four central sources - individuals, bequests, corporations and charitable foundations. Individual givers are by far the largest source - making up 75% of total gifts given annually. 
  • In the US, charitable giving makes up 2% of GDP, and over 90% of households report having given at least once in the last year. 

With these statistics in hand, one might wonder - what causes people to give in the first place? What are the underlying determinants that keep people engaged with their charitable actions? One thing that behavioral economics has taught us is that individuals make decisions in response to incentives. Incentives, whether monetary or not, will drive behavior. This is true in the marketplace for charitable giving, just like it is also true in the labor market and in the market for goods and services!

Individuals make up 75% of all gifts - making an understanding of how to increase giving among individuals of great relevance. The problem facing fundraisers is one and the same - we must first understand the underlying motivations for giving, before giving can be increased. 

There are two distinct approaches that practitioners could employ:

  1. Using up-front monies to alter either the 'price' or expected benefits of giving
  2. Varying the information provided with the request 

The first approach pinpoints the importance of pecuniary, or monetary, incentives in increasing giving. For instance, donors are more likely to contribute when provided a 'rebate' or matching gift. The second approach highlights the importance of non-pecuniary, or non-monetary incentives. Yet certain types of incentives may actually crowd out long-run motives for giving, and some types of information (especially social information) will actually decrease the propensity to give and size of the gift. 

Click here for 2014 World Giving Index infographic

In Resources for Practice, learn about each of the possible methods to increase giving that have been tested by economists.