DOES GOVERNMENT SPENDING CROWD OUT CHARITABLE CONTRIBUTIONS?

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Abstract
Recently, attention has been paid to the effect of government spending on charitable giving. Theoretical analyses have predicted that government spending crowds out giving dollar-for-dollar, but empirical studies fail to confirm this result. This paper presents a model in which government spending need not crowd out giving dollar-for-dollar and may even increase contributions. Empirical results, presented here, indicate that some types of government spending do crowd out giving while other types appear to encourage it. Government may, then, be able to design expenditure policy to stimulate charitable giving.