Charitable Giving: Who Gives More and Why
Pitt economics professor Lise Vesterlund examines gender and status differences in charity
Whether it involves writing checks to favorite charities or dropping a few dollars into Salvation Army kettles, many people traditionally choose December as the month to make charitable contributions. For many others, Hurricane Katrina and the Indian Ocean tsunami inspired donations last year.
But what prompts people to donate at all? Does it matter if a person of high status gives first? And are men or women more benevolent?
During the past year, Pitt Economics Professor Lise Vesterlund has researched charitable giving to better understand the motivations behind donations. Her study, “The Effect of Status on Charitable Giving,” shows that when a high-status person gives first to a specific charity, others are apt to follow. In addition to helping to establish that the charity is reputable, a famous donor can help elicit other acts of generosity.
“The standard theory would be that if a well-known philanthropist gave first, people would think they wouldn’t have to give,” Vesterlund says. “But what we’re seeing instead is that if a renowned individual has given up front, it can trigger a lot of subsequent contributions. This actually gives high-status donors a greater incentive to give first, because they know their contributions will get everyone else going.”
In a study conducted in Pitt’s Experimental Economics Laboratory, which can be configured to run a wide variety of computerized experiments in carefully controlled economic environments, Vesterlund divided Pitt students into what she called a high-status group and a low-status group. When those in the low-status group donated first, they didn’t give much, and the high-status group that followed with a donation gave even less. But when those in the high-status group gave first, they gave a larger amount, and contributions from the low-status group almost doubled.
“In our study, the net effect is that total contributions increase by more than 80 percent when high-status participants contributed first,” says Vesterlund. “It’s not that members of the high-status group are generally more generous. They’re only generous if they contribute first.”
Interestingly, gender also can influence an individual’s charitable giving. In the study titled “Which Is the Fair Sex? Gender Differences in Altruism” (Quarterly Journal of Economics, 2001), Vesterlund examined whether men or women tended to be more charitable. She found that the answer to this question depended on how costly it is to give. When giving impacts the donor more, then women tend to be more generous than men. When the donation “costs” the giver less, men are more generous. While women tend to donate the same fraction of their income independent of the impact, men reduce this fraction as the “cost” increases.
Such gender differences carry over to tipping. Examining restaurant data collected by researchers at Cornell University, Pitt researchers found that when it is inexpensive to tip, men are more generous. But when it costs more to tip, they hold back. Women, on the other hand, stick close to the recommended 15–20 percent tip.
“A man can have a $3 drink and leave a $2 tip,” says Vesterlund. “But for a $200 dinner for two, he’ll tip less than 15 percent. Whereas women tend to calculate their tips the same, no matter what the bill.”
Vesterlund says these studies show that fundraisers can benefit from using sequential solicitation strategies and that it is optimal for them to first solicit those who hold a higher social ranking. She says they also suggest, from a practical viewpoint, that organizations will tend to see different responses to changing tax rates and laws, depending on the gender makeup of their donor base. Charitable contributions are tax deductible, but the “cost” of giving to a charity increases as the marginal tax rate decreases. Therefore, organizations that have primarily a female donor base will tend to see a smaller variation in their contributions than those whose donor base is primarily male.
“The study suggests that while male donors respond more to information on tax deductions, female givers may be more responsive to information on, for example, the organization’s mission. However, both women and men will respond to information on the price of giving (tax rate or matching contributions)—it is just that the men respond more,” Vesterlund says.
—Sharon S. Blake