Working Paper: NBER ID: w18389
Authors: Jeffrey R. Brown; Stephen G. Dimmock; Scott Weisbenner
Abstract: 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.
Keywords: Charitable Donations; Higher Education; Economic Shocks; Endowments; Panel Data
JEL Codes: H41; I22; I23
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| average state income (H79) | charitable donations (D64) |
| house values (R31) | charitable donations (D64) |
| negative endowment shock (G59) | current-use donations (D64) |
| supply-side factors (J20) | charitable donations (D64) |
| demand-side factors (J23) | charitable donations (D64) |
| donor ability (F35) | capital donations (G31) |
| university needs (I23) | current-use donations (D64) |