The study uses a large administrative dataset from Canada to estimate the tax price elasticity of donations. The estimation strategy uses instrumental variables with individual fixed effects. Because the Canadian tax price of giving is a function of donations, the study uses variation in the marginal income tax rates to instrument for the tax price. The study estimates that the tax price elasticity of charitable donations is -1, and ranges from -1.4 to -0.18 throughout the income distribution. The study discusses the robustness of its findings and the possible policy recommendations of the result.
Ross Hickey is a Senior Research Fellow in the Melbourne Institute: Applied Economic and Social Research at the University of Melbourne; Associate Professor in the Department of Economics, Philosophy and Political Science at the University of British Columbia's Okanagan Campus; Research Affiliate at the Tax and Transfer Policy Institute at Australia National University. A public economist, his research focuses on charitable giving and charity operations. Originally from the tiny island of Newfoundland, he holds a BA from St. Francis Xavier University and MA and PhD degrees from Simon Fraser University. Prior to joining the Okanagan Campus of UBC he was a Teaching Post Doctoral Fellow in the Vancouver School of Economics at UBC.
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