Hitotsubashi Institute for Advanced Study


Tax-Price Elasticities of Charitable Giving and Selection of Declaration: Panel Study of South Korea


In this study, we estimate the tax-price elasticity of charitable giving and address the bias caused by the existence of unreported donations and self-selection to the declaration of giving. To eliminate this bias, we propose a simple estimation method based on intention-to-treat analysis. Using our proposed method and the exogenous variation in tax incentives in the 2014 South Korean tax reform, we estimate the price elasticity of donations to be −1.6 for the intensive margin and −2.6 for the extensive margin, which are more elastic than the standard results that do not account for unreported donations and self-selection. The result implies that the 2014 tax reform reduced the total amount of giving and that tax incentives should be expanded.



Report No.: HIAS-E-134
Author(s): Hiroki Kato(a), Tsuyoshi Goto(b), Youngrok Kim(c)
Affiliation: (a) Hitotsubashi University
(b) Chiba University
(c) University of Hyogo
Issued Date: September 2023
Keywords: Charitable giving, Tax incentives, Price elasticity, Selection, Declaration
JEL: D64, H24, H31