Do Government Subsidies To Nonprofits Crowd Out Donations or Donors?

Abstract

The traditional test of the public-goods crowding-out effect may mask important impacts of government subsidies on private giving because it confounds the effects of subsidies on average donation size versus their effects on the number of donors . Using panel data on the U.S. nonprofit sector, the author shows that, although increased public funding has a neutral effect on total donations, it is associated with decreased average donations but a larger pool of donors.