IFREE-Sponsored Lecture Series at ESI

Catherine Eckel, Ph.D.
Feb. 18th, 2011

"Giving to Government: Voluntary Taxation in the Lab"

The paper I presented is part of a research agenda that uses experiments to investigate charitable giving. My colleague Phil Grossman and I developed a protocol in the mid-1990s where participants make real decisions to give part of their earnings to a charitable organization – “real donation” experiments. We’ve used this framework to test various aspects of charitable giving, such as the effects of subsidies on giving (like matching contributions), and the role of perceptions of the charities in giving in the wake of Hurricane Katrina.

In “Giving to Government” we compare giving to private organizations with giving to government organizations that provide the same services. Our motivation is the observation that, in the U.S., widespread complaints that taxes are too high exist alongside substantial voluntary donations to private charities whose missions parallel those of government agencies. Again we employ a real donation experiment to compare giving to government agencies and private charities with similar missions, for four different causes (cancer research, disaster relief, education enhancement, parks and wildlife) at three levels (national, state, and local).

To our surprise, we find that individuals will give to government, paying voluntary taxes to support specific functions. Donations average 22 percent of an endowment to government, significantly lower than the 27 percent to private charities. The difference is influenced by cause, level, and perceptions of effectiveness and efficiency, as well as individual characteristics such as income and political affiliation.

In a follow up study we try to figure out how much of this is due to the fact that we are, effectively, allowing participants to “earmark” their voluntary tax payments. Here we give subjects the chance to give money to the Federal Gift Fund, which was created in the 1800s to allow patriotic individuals to donate to government. We found that subjects will give – a little – to the un-earmarked fund, but give much more when they can control the function that their contribution supports.

The results have policy implications. We suggest in the paper that governments may want to make it easier for citizens to give voluntarily to support specific activities by government. This is not likely to solve the current fiscal crises in America, but it might help a little.

Experiments are a great way to study charitable giving, because they give the researcher so much control over the situation the subjects experience in the lab. In this case we control income, information about the charities, and the alternatives available to the decision maker in the experiment. It also lets us “try out” new mechanisms – such as allowing voluntary gifts to government. This allows us to answer questions that can’t be answered with field data.

Bio:
Catherine Eckel (Ph.D. in Economics, University of Virginia, 1983) is Ashbel Smith Professor of Economics and Director of the Center for Behavioral and Experimental Economic Science (CBEES) at the University of Texas at Dallas. Her research interests bridge economics, psychology and sociology. Using experimental methods in the lab and the field, she has investigated differences in the behavior of women and men, gender- and race-based discrimination, charitable giving, and attitudes toward risk, among other topics.

She is past president of the Southern Economic Association and co-editor of the Journal of Economic Behavior and Organization. Her research has been funded by the National Science Foundation and various private foundations. She co-directs a teaching technology project promoting interactive learning by using wireless handheld computers, which has earned her two university-level teaching awards. Before joining UT Dallas, she was Professor of Economics at Virginia Tech, where she directed the Lab for the Study of Human Thought and Action (LSHTA). She also served as a program officer for the Economics Program at the National Science Foundation (1996-8).

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