Tax-Price Elasticities of Charitable Giving and Selection of Declaration: Panel Study of South Korea
Abstract:
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 |
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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 |
Links: | PDF, HERMES-IR, RePEc |