Increases in income-support payments reduce the demand for charity: A difference-in-difference analysis of charitable-assistance data from Australia over the COVID-19 pandemic

Abstract

Charities play an increasingly important role in helping people experiencing poverty. However, institutionalized charity shifts the burden of poverty reduction away from the state and exposes recipients to stress and stigma. In this paper, we examine whether the need for institutionalized charity can be offset through enhanced state support. As in other countries, the Australian government responded to the COVID-19 pandemic by substantially increasing the level of income support to citizens through several temporary payments. We draw on this natural experiment and time-series data from the two largest charity organizations in Queensland, Australia to examine how these payments altered the demand for institutionalized charity. We model these data using difference-in-difference regression models to approximate causal effects. By exploiting the timing and varying amounts of the payments, our analyses yield evidence that more generous income support reduces reliance on charity. Halving the demand for charity requires raising pre-pandemic income-support by AUD$42/day, with supplements of approximately AUD$18/day yielding the greatest return on investment.