An Experimental Test of the Crowding Out Hypothesis : The Nature of Beneficent Behavior

An extensively studied model of public goods provision implies that government donations to charity crowd out private donations dollar-for-dollar. Field studies fail to verify this result. Several analysts argue that the problem lies with the specification of donor preferences. We report on a new experiment that provides a direct test of donor preferences free of the strategic factors that can confound tests in the field, and in other experimental settings. Our method involves the dictator game. We find extensive but incomplete crowding out - direct evidence that donor preferences are incorrectly specified by the standard model