Three Essays on the Economics of Charity

This dissertation studies how charities' receipts and expenses respond to developments in the communities they serve. Chapter I studies the relationship between political contributions and charities' private donations and fundraising expenses. Chapter II studies how food aid charities respond to increasing food insecurity. Chapter III studies the effect of the coronavirus pandemic on the charitable sector. Chapter I asks how political giving affects the finances of the average charity. This paper matches Form 990 data on charities' finances to Federal Election Commission and National Institute for Money in Politics data on political contributions made in the geographic area where the charity fundraises, during its fiscal year. A 10% increase in political contributions costs the average charity 0.79% of its private charitable contributions, implying that one dollar of political contributions crowds out nearly $3 in private charity. However, the majority of this crowd-out is attributable to changes in the charity's fundraising strategy. Subsequent analysis explores different channels through which political contributions may motivate the charity to adjust its fundraising. For most charities, political contributions reduce the return to charitable fundraising. One key exception is the human services sector. At these charities, the return to fundraising is unaffected by political contributions; however, they still lose private contributions. When paired with a model of optimal charitable fundraising in the presence of political contributions, these results imply that human services charities' production functions depend directly on the realization of the political state. Chapter II investigates how donors to food assistance charities respond to exogenous changes in recipients' unmet needs. When food insecurity rises by one percentage point, the average food assistance charity increases fundraising by 0.9%. Without this response, private contributions would have fallen by at least 0.2%. These results are consistent with a model in which economic inequality simultaneously raises the donor's marginal benefit of giving and reduces their awareness of the recipient's circumstances. Charitable fundraising plays a key role in maintaining the charity's revenues at a time when they are most needed. Chapter III, coauthored with Jennifer Mayo, studies the effects of the coronavirus pandemic on the U.S. nonprofit sector. Using a difference-in-differences framework, we leverage variation in the timing of charities' fiscal years, finding that government intervention helped keep charities afloat during the pandemic. On average, government grants rose by $975,000, while private contributions fell by $380,000. Despite the net increase in their contributions, charities exposed to the pandemic lost employees and made fewer program expenditures than non-exposed charities. However, charities which had Paycheck Protection Program loans approved during the first year of the pandemic fared better than eligible charities without approved PPP loans.PhDPublic Policy & EconomicsUniversity of Michigan, Horace H. Rackham School of Graduate Studieshttp://deepblue.lib.umich.edu/bitstream/2027.42/176508/1/sakarol_1.pd