VIETNAM – NETHERLANDS PROGRAMME FOR M. IN DEVELOPMENT ECONOMICS UNIVERSITY OF ECONOMICS INSTITUTE OF SOCIAL STUDIES HO CHI MINH CITY THE HAGUE VIETNAM THE NETHERLANDS ECONOMICS OF CHARITABLE GIVING: UNDERSTANDING THE MOTIVATION OF DONATION BEHAVIOR NGUYEN NGOC NU HO CHI MINH CITY, DECEMBER 2015 MASTER OF ARTS IN DEVELOPMENT ECONOMICS 1 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com ABSTRACT This paper studies the individual determinants of charitable giving including in time, donation in gift, and money donation. The research analyzes survey data in Ho Chi Minh City on charity giving in the last 12 months with 500 individuals. We design a questionnaire to collect information on the donation behavior, individual characteristics, and perceptual and attitudinal factors.
A multivariate probit model is applied to analyze the three related behavior of in-kind, time and money donation. We found that richer, religious and female respondents are more likely to give. Perceptual and attitudinal factors are not significant. Particularly we found that altruism, warm glow, prestige and reciprocity, and government do not have a statistical significant impact on all kinds of donation.
The only exception is family influence, implying that the giving of the current generation would result in good giving habit of the future generations Key words: Economics of Charity Giving, altruism, pure altruism, impure altruism, warm glow, prestige, and reciprocity. 2 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com ACKNOWLEDGEMENT I would like to thank for special persons who supported me during the tough time of writing this thesis. Specially, I would like to express my gratitude to all the lectures who provided evaluable knowledge and supported me to complete the thesis. I am also indebted to Dr.
Pham Khanh Nam who positively encourage and assist me to finish the thesis process. Additionally, thanks are also due to all the VNP staffs who create favorable conditions in my process of learning and researching: Ms. Xuan Hong, Ms. Man Thi, Mr.
Nhan Tam, Mr. Quang Huy and many others. For my family who created the conditions to me on the academic journey. The completion of this dissertation is a valuable gift which assist me to go further in the studying process as well as my career in the future.
I recognized that although studying is really challenging, yet it is more interesting than I thought. For this, I want to give a special thank to my mom who movetivated and supported me to finish the survey. Completing the survey process is fraught with a lot of difficulties. I acknowledge the contribution of all my friends, all the respondents who also enthusiastically supported me to fulfill the surveys.
Especially, I would like to say thank you, Le Viet Thanh, who guides me some necessary knowledge about running stability in working process. My main research idea is about the charitable donation. In the working process, I also receive the donated gift from many people. That was the unforgettable journey with lots of enjoyable experiences.
Thank you, Nguyen Ngoc Nu Dec, 2015 3 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com TABLE OF CONTENTS Chapter 1: Introduction 1. Research Objectives and scope of study. Structure of the thesis. Theoretical Models of Charity Giving.
The Pure Altruism Model. The Impure Altruism Models. The Warm-glow Giving Model. The Conspicuous Giving Model.
The Reciprocity Model. 13 Chapter 2: Literature Review 2. A Review of empirical studies on charity giving. 16 Chapter 3: Research Methodology 3.
Data collection method. the survey instruments. econometric models and Hypothesises. Multivariate probit model.
The independent variables. 23 4 LUAN VAN CHAT LUONG download : add luanvanchat@agmail. 24 Chapter 4: Analysis of Charity Giving Behavior 4. The Charity Giving.
Perception and attitude toward charity giving. Determinants of Donation: Econometric Analysis. Multivariate Logistic Regression. Analysis of Donation Behavior.
Kind of Donation. Kind of Money Donation. 42 Chapter 5: Conclusions and Policy Implications 5. Research Objective Summary.
The Regression Models Summary. The Data Collection Summary. The Main Finding. 47 From Logit Model.
47 From Multivariate Probit. 47 From The Statistical Test. 48 5 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com TABLE OF APPENDICES 1 Appendix 1 Pretest Questionnaire. 52 2 Appendix 2 The Final Questionnaires.
67 3 Appendix 3 Stata Analyses Output. 78 6 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com LIST OF TABLES Table 1 Perceptual/Attitudinal questions used in this studies. 17 Table 2 Explanatory variables of the logit and multivariate probit models. 24 Table 3 Summary statistics.
27 Table 4 Percentage of donation by individual characteristics and Chi2 test. 28 Table 5 Respondents’ Age Descriptive Statistics. 29 Table 6 Summary of statistic results. 30 Table 7 Classification Predicted Table.
32 Table 8 Logistic Regression Results. 33 Table 9 Multivariate probit estimation results for in-kind gift, time, and money donation. 35 Table 10 Percent of each cases of information channel. 36 Table 11 Information Channel and Income.
37 Table 12 Information Channel and Gender. 37 Table 13 Information Channel and Religion. 38 Table 14 Information Channel and Education. 38 Table 15 Information Channel and Age.
39 Table 16 Percent of Cases in Kind of Donation. 39 Table 17 Donation Kind via Income, Gender, Religion, and Education. 40 Table 18 Kind of Donation and Age. 40 Table 19 Percent of cases in money donation kind.
41 Table 20 Kind of Money via Income, Gender, Religion, and Education. 41 Table 21 Methods of Money Transfer and Age. 41 Table 22 Percent of Cases Donation Sectors. 42 Table 23 Donation Sectors and Income.
43 Table 24 Donation Sectors and Gender. 43 Table 25 Donation Sectors and Religion. 44 Table 26 Donation Sectors and Education. 44 Table 27 Age and Donation Sectors.
45 7 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com CHAPTER 1 INTRODUCTION 1. PROBLEM STATEMENT In any society, there are people who are lagging behind the overall growth and development of the economy, including the poor, minor ethnic groups, people with illness and disability, and people suffering natural or personal/family disasters. And these groups of people account for a considerable proportion. According to The World Bank (2015), there is 12.7% of the world’s population in 2012, or 896 million people with daily income below $1.
FAO (2014) reports that there are 794.6 million people with undernourishment around the world in 2014, which concentrated in the developing countries. Climate change, global warming, and environmental disaster result in more than 300,000 deaths per year according to the World Hunger Education Service (2015). More than one million children in the world are living in the poverty situation with 22,000 children deaths per day in 2014 (UNICEF, 2015). In addition, the lives of more than 2 million children are threatened by fatal but preventable diseases.
The Disabled World (2015) reported that people with disability accounts for 10% of global population, with 650 million people, and 20% of them is in the world poorest people in 2014. Leaving these people struggling themselves may result in a society with substantial unhappiness, inequality. As a result, many economies while pursuing the target of efficiency also try to provide help and assistance to people who are in need. Great efforts have been devoted to relieve their pains, to help them to respond and recover from disasters, as well as to improve their ability to reside.
According to the US Government Spending (2015), the amount of expenditure for beneficiaries of the federal US government is $888 billion. Moreover, the spending for old age survivor issue was $ 440 per year per person and for disability issue was $90 billion per year in 2005. Eurostat Statistics (2015), presented the pension beneficiaries across 21 countries among 28 EU members in 2014, that there was a total of EUR 1717 billion spent for unemployment, survivors, disability, and old age in 2012. The spending was 17.5% of GDP in Greece; 15% of GDP in Italy, France, and Austria; 7.3% in Ireland; and 7.
Funding for these relief, recovery and resilience activities are certainly from taxation. And it is well known that taxes distort markets. Goods and services taxes result in inefficient allocation of resources and lead to deadweight loss. Income taxes weaken the incentive to work and thus result in a reduction in overall welfare.
Charity giving is an alternative sources of funding for the activities of helping people in need. Charity donation is believed to be more efficient than taxation as it does not distort the efficient allocation of resource nor reduce the incentive to work. In addition, charity donation 8 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com is voluntary. While taxes are mandatory to all, including those who find that taxes are a critical burden, charity donation is only from those who are willing to pay.
As a result, charity donation are more efficient comparing to taxes, and at the same time avoids imposing financial burden on people in difficult circumstances. The Charities Aid Foundation (2015) investigated over 130 countries worldwide about their charity donation activities by Gallup’s data gathering method. The collected information on the behavior of giving, helping a stranger, donating money and volunteering time in the last 5 year. The top five countries in terms of giving index are Myanmar, United Stated of America, New Zealand, Canada, and Australia.
Giving USA (2015) reports that charity private donation in USA was estimated over US$269 billion, especially in religion sector with more than 100 $billion money donation in 2014. UK Giving (2014) estimated that the total amounts given by private donation is £10. The largest typical donation is religious causes with 14% per total amount. Medical, children, hospitals and overseas causes is also get the highest charitable monetary value about 11 to 12 %.
According the Canada Social Trends (2011), total amount of donation in 2010 was estimated to be 11 billions CAD, with the average amount per individual was $466. In general, charity donation was substantially contributed by a large amount of money across the world. As an alternative source of funding, charity donation has been attracting many economists, both theorists and empirical researchers. Several economic models have been developed to explain the behavior of charity giving.
The pure altruism model as shown in Andreoni (1988, 1989), Bergstrom, Blume and Varian (1986) postulates that individuals consider the final output of charity activities as public goods where they gain utility from. The warm- glow giving model of Andreoni (1989, 1990) recognizes that people enjoy giving, and thus the amount of donation enters as an argument in the utility function. The conspicuous giving model of Glazer and Conrad (1996) assumes that people donate to signal their income and wealth, and in this model, giving is a conspicuous consumption item. Developing from the model of impure altruism, Kolm (2000) used another model of reciprocity to explain the donation behavior.
Reciprocity is explained via the donation awareness of fairness and appreciation and people donate with the expectation that they will receive help when in need. While in the pure altruism model, people simply concern the amount charities receive, the three later models imply that donors derive utility from giving and therefore are called impure altruism models. Charity giving is also the subject of many studies in the empirical economic literature. The topic of charity giving attracted economists, psychologists as well as researchers in the fields of marketing and business science.
Economists examines several issues related to charity giving using empirical data (see Andreoni and Gale 1996, Bauer, Bredtmann, and Schmidt 2012, Kitchen 1992, Yao 2015) or experimental data (see Ded, Gazzale and Kotchen 2013, Brown, Meer, and Williams 2013, Sussman, Sharma, and Alter 2015). Studying charity donation in psychology, marketing and business science usually focus on the effects of psychological factors, perceptions and attditude on donation behavior (see, for example, Sargeant, Ford, and West 2005, Chompff 2009).