Empirical Relations Between Government Spending and Charitable Donations

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Abstract
One might expect that increased governmental social-service expenditures would reduce charitable donations, but the direction and magnitude of this effect is theoretically indeterminate. Empirical estimates of this "crowdout" phenomenon are produced from British time-series data. Results suggest that a dollar of gov ernmental social-service expenditures "crowds out" only about one-half cent of charitable donations. This implies that governmental cutbacks will not be largely replaced by charitable donations, a result consistent with most previously pub lished studies.