Luận văn thạc sĩ UEH economics of charitable giving understanding the motivation of donation

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VIETNAM – NETHERLANDS PROGRAMME

FOR M.A. IN DEVELOPMENT ECONOMICS

UNIVERSITY OF ECONOMICS

HO CHI MINH CITY

VIETNAM

INSTITUTE OF SOCIAL STUDIES

THE HAGUE

THE NETHERLANDS

ECONOMICS OF CHARITABLE GIVING:

UNDERSTANDING THE MOTIVATION OF

DONATION BEHAVIOR

NGUYEN NGOC NU

HO CHI MINH CITY, DECEMBER 2015

MASTER OF ARTS IN DEVELOPMENT ECONOMICS

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ABSTRACT

This paper studies the individual determinants of charitable giving including in time,

donation in gift, and money donation. The research analyzes survey data in Ho Chi Minh

City on charity giving in the last 12 months with 500 individuals. We design a questionnaire

to collect information on the donation behavior, individual characteristics, and perceptual

and attitudinal factors. A multivariate probit model is applied to analyze the three related

behavior of in-kind, time and money donation. We found that richer, religious and female

respondents are more likely to give. Perceptual and attitudinal factors are not significant.

Particularly we found that altruism, warm glow, prestige and reciprocity, and government

do not have a statistical significant impact on all kinds of donation. The only exception is

family influence, implying that the giving of the current generation would result in good

giving habit of the future generations

Key words: Economics of Charity Giving, altruism, pure altruism, impure altruism, warm

glow, prestige, and reciprocity.

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ACKNOWLEDGEMENT

I would like to thank for special persons who supported me during the tough time of writing

this thesis. Specially, I would like to express my gratitude to all the lectures who provided

evaluable knowledge and supported me to complete the thesis. I am also indebted to Dr.

Pham Khanh Nam who positively encourage and assist me to finish the thesis process.

Additionally, thanks are also due to all the VNP staffs who create favorable conditions in

my process of learning and researching: Ms. Xuan Hong, Ms. Man Thi, Mr. Nhan Tam, Mr.

Quang Huy and many others.

For my family who created the conditions to me on the academic journey. The completion

of this dissertation is a valuable gift which assist me to go further in the studying process as

well as my career in the future. I recognized that although studying is really challenging, yet

it is more interesting than I thought. For this, I want to give a special thank to my mom who

movetivated and supported me to finish the survey.

Completing the survey process is fraught with a lot of difficulties. I acknowledge the

contribution of all my friends, all the respondents who also enthusiastically supported me to

fulfill the surveys. Especially, I would like to say thank you, Le Viet Thanh, who guides me

some necessary knowledge about running stability in working process.

My main research idea is about the charitable donation. In the working process, I also receive

the donated gift from many people. That was the unforgettable journey with lots of enjoyable

experiences.

Thank you,

Nguyen Ngoc Nu

Dec, 2015

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TABLE OF CONTENTS

Chapter 1: Introduction

1.1. Problem Statement ..................................................................................... 8

1.2. Research Objectives and scope of study...................................................... 10

1.3. Structure of the thesis............................................................................... 11

2.1. Theoretical Models of Charity Giving ........................................................ 12

2.1.1. The Pure Altruism Model.................................................................................. 12

2.1.2. The Impure Altruism Models............................................................................ 13

2.1.2.1. The Warm-glow Giving Model ................................................................. 13

2.1.2.2. The Conspicuous Giving Model ................................................................ 13

2.1.2.3. The Reciprocity Model .............................................................................. 13

Chapter 2: Literature Review

2.2. A Review of empirical studies on charity giving .......................................... 14

2.2.1. Empirical Studies .............................................................................................. 14

2.2.2. Experimental Studies......................................................................................... 15

2.2.3. Psychology Studies ........................................................................................... 16

Chapter 3: Research Methodology

3.1. The model ................................................................................................ 18

3.2. Data collection method.............................................................................. 19

3.3. the survey instruments.............................................................................. 19

3.4. econometric models and Hypothesises........................................................ 20

3.4.1. Logistic regression ............................................................................................ 20

3.4.2. Multivariate probit model.................................................................................. 20

3.5. The independent variables......................................................................... 20

3.5.1. Individual Characteristics.................................................................................. 20

3.5.1.1. Gender........................................................................................................ 20

3.5.1.2. Age............................................................................................................. 21

3.5.1.3. Education ................................................................................................... 21

3.5.1.4. Religion...................................................................................................... 21

3.5.1.5. Income ....................................................................................................... 22

3.5.2. Altruism............................................................................................................. 22

3.5.3. Warm glow........................................................................................................ 23

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3.5.4. Prestige .............................................................................................................. 23

3.5.5. Reciprocity ........................................................................................................ 23

3.5.6. Social influence ................................................................................................. 24

3.5.6.1. Government influence ..................................................................................... 24

3.5.6.2. Tax Incentive................................................................................................... 24

3.5.6.3. Family Influence ............................................................................................. 24

Chapter 4: Analysis of Charity Giving Behavior

4.1. Respondents Profile .................................................................................. 27

4.1.1. The Charity Giving............................................................................................ 27

4.1.2. Gender............................................................................................................... 28

4.1.3. Education........................................................................................................... 28

4.1.4. Income............................................................................................................... 28

4.1.5. Religion ............................................................................................................. 29

4.1.6. Age .................................................................................................................... 29

4.1.7. Perception and attitude toward charity giving................................................... 29

4.2. Determinants of Donation: Econometric Analysis ....................................... 32

4.2.1. Logit model ....................................................................................................... 32

4.2.2. Multivariate Logistic Regression ...................................................................... 34

4.3. Analysis of Donation Behavior................................................................... 36

4.3.1. Information Channels........................................................................................ 36

4.3.2. Kind of Donation............................................................................................... 39

4.3.3. Kind of Money Donation .................................................................................. 40

4.3.4. Donation Sectors............................................................................................... 42

Chapter 5: Conclusions and Policy Implications

5.1. Research Objective Summary.................................................................... 46

5.2. The Regression Models Summary .............................................................. 46

5.3. The Data Collection Summary................................................................... 46

5.4. The Main Finding..................................................................................... 47

From Logit Model ........................................................................................................ 47

From Multivariate Probit.............................................................................................. 47

From The Statistical Test ............................................................................................. 47

5.5. Policy Implication..................................................................................... 48

5.6. Limitations............................................................................................... 48

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TABLE OF APPENDICES

1 Appendix 1 Pretest Questionnaire .................................................................................. 52

2 Appendix 2 The Final Questionnaires............................................................................ 67

3 Appendix 3 Stata Analyses Output................................................................................. 71

4 Appendix 4 ....................................................................................................................... 72

5 Appendix 5 ....................................................................................................................... 73

6 Appendix 6 ....................................................................................................................... 74

7 Appendix 7 ....................................................................................................................... 75

8 Appendix 8 ....................................................................................................................... 76

9 Appendix 9 ....................................................................................................................... 77

10 Appendix 10 ................................................................................................................... 78

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LIST OF TABLES

Table 1 Perceptual/Attitudinal questions used in this studies........................................... 17

Table 2 Explanatory variables of the logit and multivariate probit models. ..................... 24

Table 3 Summary statistics................................................................................................ 27

Table 4 Percentage of donation by individual characteristics and Chi2 test..................... 28

Table 5 Respondents’ Age Descriptive Statistics.............................................................. 29

Table 6 Summary of statistic results ................................................................................. 30

Table 7 Classification Predicted Table.............................................................................. 32

Table 8 Logistic Regression Results ................................................................................. 33

Table 9 Multivariate probit estimation results for in-kind gift, time, and money

donation ............................................................................................................................... 35

Table 10 Percent of each cases of information channel ................................................... 36

Table 11 Information Channel and Income...................................................................... 37

Table 12 Information Channel and Gender...................................................................... 37

Table 13 Information Channel and Religion ..................................................................... 38

Table 14 Information Channel and Education................................................................... 38

Table 15 Information Channel and Age ............................................................................ 39

Table 16 Percent of Cases in Kind of Donation ................................................................ 39

Table 17 Donation Kind via Income, Gender, Religion, and Education........................... 40

Table 18 Kind of Donation and Age. ................................................................................ 40

Table 19 Percent of cases in money donation kind ........................................................... 41

Table 20 Kind of Money via Income, Gender, Religion, and Education .......................... 41

Table 21 Methods of Money Transfer and Age ............................................................... 41

Table 22 Percent of Cases Donation Sectors..................................................................... 42

Table 23 Donation Sectors and Income............................................................................. 43

Table 24 Donation Sectors and Gender............................................................................. 43

Table 25 Donation Sectors and Religion........................................................................... 44

Table 26 Donation Sectors and Education ........................................................................ 44

Table 27 Age and Donation Sectors.................................................................................. 45

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CHAPTER 1

INTRODUCTION

1.1. PROBLEM STATEMENT

In any society, there are people who are lagging behind the overall growth and development

of the economy, including the poor, minor ethnic groups, people with illness and disability,

and people suffering natural or personal/family disasters. And these groups of people

account for a considerable proportion. According to The World Bank (2015), there is 12.7%

of the world’s population in 2012, or 896 million people with daily income below $1.9. FAO

(2014) reports that there are 794.6 million people with undernourishment around the world

in 2014, which concentrated in the developing countries. Climate change, global warming,

and environmental disaster result in more than 300,000 deaths per year according to the

World Hunger Education Service (2015). More than one million children in the world are

living in the poverty situation with 22,000 children deaths per day in 2014 (UNICEF, 2015).

In addition, the lives of more than 2 million children are threatened by fatal but preventable

diseases. The Disabled World (2015) reported that people with disability accounts for 10%

of global population, with 650 million people, and 20% of them is in the world poorest

people in 2014.

Leaving these people struggling themselves may result in a society with substantial

unhappiness, inequality. As a result, many economies while pursuing the target of efficiency

also try to provide help and assistance to people who are in need. Great efforts have been

devoted to relieve their pains, to help them to respond and recover from disasters, as well as

to improve their ability to reside.

According to the US Government Spending (2015), the amount of expenditure for

beneficiaries of the federal US government is $888 billion. Moreover, the spending for old

age survivor issue was $ 440 per year per person and for disability issue was $90 billion per

year in 2005. Eurostat Statistics (2015), presented the pension beneficiaries across 21

countries among 28 EU members in 2014, that there was a total of EUR 1717 billion spent

for unemployment, survivors, disability, and old age in 2012. The spending was 17.5% of

GDP in Greece; 15% of GDP in Italy, France, and Austria; 7.9% in Estonia; 7.3% in Ireland;

and 7.7% in Lithuania.

Funding for these relief, recovery and resilience activities are certainly from taxation. And

it is well known that taxes distort markets. Goods and services taxes result in inefficient

allocation of resources and lead to deadweight loss. Income taxes weaken the incentive to

work and thus result in a reduction in overall welfare.

Charity giving is an alternative sources of funding for the activities of helping people in

need. Charity donation is believed to be more efficient than taxation as it does not distort the

efficient allocation of resource nor reduce the incentive to work. In addition, charity donation

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