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Tax-Price Elasticities of Charitable Giving and Selection of Declaration: Panel Study of South Korea

Author

Listed:
  • Hiroki Kato

    (Graduate School of Economics, Osaka University, Osaka, Japan)

  • Tsuyoshi Goto

    (Graduate School of Social Sciences, Chiba University, Chiba, Japan)

  • Youngrok Kim

    (Research Institute for Socionetwork Strategies, Kansai University, Osaka, Japan)

Abstract
This study estimates the tax-price elasticity of donations, considering the bias caused by the fact that the claim of tax incentives for charitable giving depends on the taxpayer’s decision. We first present a way to eliminate this bias by supporting the intention-to-treat analysis. We then estimate the price elasticity by our method, using exogenous variation in tax incentives due to the 2014 tax reform in South Korea. We find that a 1% increase in donation prices reduces donor contributions by 1.6% and the donor ratio by 2.6%. Next, we use the control function approach, one of the instrumental variable methods, to examine how endogeneity from the decision to use tax incentives biases the estimation of price elasticity. We find that those with large amounts of charitable giving without tax incentives do not declare their giving, leading to an underestimation (in absolute value) of the price elasticity of donors’ contribution amount.

Suggested Citation

  • Hiroki Kato & Tsuyoshi Goto & Youngrok Kim, 2023. "Tax-Price Elasticities of Charitable Giving and Selection of Declaration: Panel Study of South Korea," Discussion Papers in Economics and Business 23-05, Osaka University, Graduate School of Economics.
    • Handle: RePEc:osk:wpaper:2305
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    References listed on IDEAS

    as
    1. Almunia, Miguel & Guceri, Irem & Lockwood, Ben & Scharf, Kimberley, 2020. "More giving or more givers? The effects of tax incentives on charitable donations in the UK," Journal of Public Economics, Elsevier, vol. 183(C).
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    More about this item

    Keywords

    Charitable giving; Tax incentives; Price elasticities; Selection; Declaration.;
    All these keywords.

    JEL classification:

    • D64 - Microeconomics - - Welfare Economics - - - Altruism; Philanthropy; Intergenerational Transfers
    • H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies
    • H31 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Household

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