A large literature in public economics seeks to answer whether government activity crowds out charitable donations, but the empirical evidence is mixed. To resolve this inconsistency, we consider that people base their donation decisions not only on government spending per se, but also on their support of the government. Using US tax return data, we find that support for the incumbent president crowds out charitable donations. The reduction in donations cannot be explained by changes in government spending, beliefs about government spending, government grants to Republican or Democrat-leaning charities, or fundraising activity. Instead, it is consistent with the notion that partisans attribute greater problem-solving responsibilities to own-party governments.
25 Sep 2022