Halloween and Charitable Giving

Halloween and That “Warm Glow”

Nov 4, 2012 • Behavioral Economics, Demand, Supply, and Markets, Government, Households, Regulation, Thinking Economically, Uncategorized • 320 Views    No Comments

With NJ kids trick or treating on November 5 because of Hurricane Sandy, they still have time to look at the Zillow Halloween Index. Zillow, the housing website, tells us that the biggest candy hauls come from more affluent neighborhoods that are somewhat densely populated, relatively safe, and walkable. Knowing what makes for more candy, trick or treaters can target the best block.

Reading about locating the biggest candy givers took me to the economics of charity. Yes, charitable giving is different from Halloween candy and UNICEF contributions but not always.

Economists who investigate charitable giving start by identifying it as a market. You have donors on the supply side, charities on the demand side, and government affecting the position of both curves. The most economic research on charitable giving has been devoted to the supply side and government. Among donor groups, individuals are the largest. (Charitable foundations, corporations and bequests are other donor groups.) Interestingly, a “U” curve exists for donors, with the most affluent and the least affluent giving the largest proportions of their income. While the size of what the affluent give appears to be correlated with the S&P (see below), for those with less, the reason for the relatively high amount is religion. As for government, tax policy and direct grants to charities affect how much donors give and the amount that charities solicit. When government provides more, they can “crowd out” private giving.

How then can Halloween and charitable donations be similar? It’s all about our “warm glow” and prestige. Explained by David Leonhardt, “In the warm-glow view of philanthropy, people aren’t giving money merely to save the whales; they’re also giving money to feel the glow that comes with being the kind of person who’s helping to save the whales” or giving to trick or treaters. And, if the whole neighborhood supports trick or treaters, don’t you lose prestige by being the one household that turns out the lights and refuses to open the door?

Where does this leave us? For the most candy, according to Zillow, trick or treat in San Francisco, Boston and Honolulu.

Sources and Resources: The first place to go for more about why we give is David Leonhardt’s 2008 NY Times article and then, for a more academic perspective to this John List article in The Journal of Economic Perspectives (the source of the graph that follows). And here is the whole Zillow list of good cities for trick or treaters and even a specific list of neighborhoods. Thanks to marketplace.org for its segment on Zillow and Halloween.

In the following graph, as Dr. List notes, changes in levels of charitable giving were more responsive to upswings in the S&P than declines.

Charitable giving and changes in the S&P

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