The Supply of and Demand for Charitable Donations to Higher Education

Jeffrey R. Brown, Stephen G. Dimmock, Scott Weisbenner

Chapter in NBER book How the Financial Crisis and Great Recession Affected Higher Education (2015), Jeffrey R. Brown and Caroline M. Hoxby, editors (p. 151 - 174)
Conference held September 27-28, 2012
Published in December 2014 by University of Chicago Press
© 2015 by the National Bureau of Economic Research

Charitable donations are an important revenue source for many institutions of higher education. We explore how donations respond to economic and financial market shocks, accounting for both supply and demand channels through which these shocks operate. In panel data with fixed effects to control for unobservable differences across universities, we find that overall donations to higher education - and especially capital donations for university

endowments or for buildings- are positively and significantly correlated with the average income and house values in the state where the university is located (supply effects). We also find that when a university suffers a negative endowment shock that is large relative to its operating budget, donations increase (demand effects). This is especially true for donations earmarked for current use. We conclude by discussing the importance of understanding how donations respond to economic shocks for effective financial risk management by colleges and universities.

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Document Object Identifier (DOI): 10.7208/chicago/9780226201979.003.0005

This chapter first appeared as NBER working paper w18389, The Supply of and Demand for Charitable Donations to Higher Education, Jeffrey R. Brown, Stephen G. Dimmock, Scott Weisbenner
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