UK Charity Donations : Government Grants and Crowding-In

This study examines the determinants of voluntary donations to UK charities, using empirical specifications that combine error-component and simultaneous-equations methods. In a series of tests, we identify the fixed-effects endogenous representations as the best empirical models. When endogeneity is taken into account, government grants cause significant crowding-in. Price coefficients are negative, and fund-raising is a positive stimulant. Legacies are viewed by donors as a substitute to voluntary donations and, hence, cause crowding-out. Health and religion charities are net revenue maximizes; overseas charities are total revenue maximizes; and social welfare charities are neither net revenue nor total revenue maximizes