Do Public Subsidies Leverage Private Philanthropy for the Arts? Empirical Evidence on Symphony Orchestras

Abstract

The relationship between public subsidies and private philanthropy is at the heart of a common claim that state subsidies “leverage” private donations to the arts. This claim might seem counterintuitive to some who find it more likely that state funding would crowd out private donations. This article empirically tests this question, using panel data on five major American symphony orchestras. The principal result of the statistical analysis is that neither claim is correct for these orchestras: The two funding sources are independent. This finding has significant managerial implications with respect to revenue-raising strategies for arts organizations as well as nonprofit firms in general. These implications and several related policy issues are discussed.