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Center for Global Development presents a brown bag seminar on Warm Glow, Information, and Inefficient Charitable Giving
featuring Clair Null University of California, Berkeley
Clair is a Ph.D. candidate at the University of California, Berkeley
Friday, January 23, 2009
at Center for Global Development
1800 Massachusetts Avenue, NW, Third Floor, Washington, DC
Paper abstract: I investigate the efficiency consequences of donors who simultaneously give to multiple charities using revealed preference data from a lab experiment in which more than 200 real-world donors decide how to divide a gift between a charity they currently support and a set of international development charities. Most subjects simultaneously give to multiple development charities that have similar mission statements. This is true even when the social benefit of gifts, proxied by the matching rates received by the charities, are not equal. Taking preferences for charities as given, these choices result in substantial inefficiencies. Subjects forfeited social surplus (matching funds) equal to 25% of the value of their gifts. Two-thirds of donors who split their gifts are motivated by "warm glow", personal satisfaction derived from the act of giving that leads to a love of variety even among charities that have similar missions. The rest appear to do so because of risk aversion over the social benefit of their gifts, which leads them to diversify their charitable portfolios. Few subjects were willing to pay for information that could have enabled them to increase the social benefit of their gifts. This might help explain why there are so few rigorous evaluations of international development programs: such evaluations are costly to charities and not highly valued by donors.