TY  - JOUR
AU  - Heutel,Garth
TI  - Crowding Out and Crowding In of Private Donations and Government Grants
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 15004
PY  - 2009
Y2  - May 2009
UR  - http://www.nber.org/papers/w15004
L1  - http://www.nber.org/papers/w15004.pdf
N1  - Author contact info:
Garth Heutel
Bryan 466, Department of Economics
University of North Carolina at Greensboro
P. O. Box 26170
Greensboro, NC 27402
Tel: 336/334-4872
Fax: 336/334-5580
E-Mail: gaheutel@uncg.edu
M3  - presented at "SI 2007 Public Policy and the Environment Workshop", July 23-24, 2007
AB  - A large literature examines the interaction of private and public funding of public goods and charities, much of it testing if public funding crowds out private funding. This paper makes two contributions to this literature. First, the crowding out effect could also occur in the opposite direction: in response to the level of private contributions, the government may alter its funding. I model how crowding out can manifest in both directions. Second, with asymmetric information about the quality of a public good, one source of funding may act as a signal about that quality and crowd in the other source of funding. I test for crowding out or crowding in either direction using a large panel data set gathered from nonprofit organizations' tax returns. I find strong evidence that government grants crowd in private donations, consistent with the signaling model. Regression point estimates indicate that private donations crowd out government grants, but they are not statistically significant.
ER  -