Regulating altruistic agents

Altruism or `regard for others' can encourage self-restraint among generators of negative externalities, thereby mitigating the externality problem. We explore how introducing impure altruism into standard regulatory settings alters regulatory prescriptions. We show that the optimal calibration of both quantitative controls and externality taxes are affected. It also leads to surprising results on the comparative performance of instruments. Under quantity-based regulation welfare is increasing in the propensity for altruism in the population; under price-based regulation the relationship is non-monotonic. Price-based regulation is preferred when the population is either predominantly altruistic or predominantly selfish, quantity-based regulation for cases in between

Beauty, Gender and Stereotypes: Evidence from Laboratory Experiments

The existence of a beauty premium in the labor market and the male-female wage gap suggests that appearance can matter in the real world. We explore beauty and gender in a public goods experiment and find similar effects. We find a beauty premium, even though beautiful people contribute, on average, no more or less than others. The beauty premium, however, disappears when we provide information on individual contributions, and becomes a beauty penalty. Players seem to expect beautiful people to be more cooperative. Relative to these expectations, they appear more selfish, which in turn results in less cooperation by others. These appear to be clear examples of stereotyping. We also find a substantial benefit to being male, especially with information. This is primarily due to men being better "leaders." Men tend to make large contributions, and people follow their example and give more in later rounds.

Government Grants to Private Charities: Do They Crowd-Out Giving or Fundraising?

When the government makes a grant to a private charitable organization, does it displace private giving? This is one of the fundamental policy questions in public finance, and much theoretical and empirical research has been devoted to understanding the relationship between private donations and government funding. Under the classic crowding-out hypothesis, donors let their involuntary tax contributions and substitute for their voluntary contributions. This paper raises the prospect of a second reason: that the stretegic response of the charity will be to pull back on its fundraising efforts after receiving a grant. We develop a theoretical model to show a charity that chooses its level of fundraising efforts strategically will reduce fundraising in response to government grants. We then analyze data on tax returns of 474 social services organizations and 245 arts organizations between 1982 and 1996. These two types of charitable organizations differ in both the nature of the services they provide and in their reliance on private donations and government grants. We find evidence that government grants to nonprofits are causing significant reductions in fundraising efforts, after looking at different types of fundraising activities. This finding is important for two reasons. First, it means that the behavior of the nonprofit organizations is consistent with the predictions of an economic model within a strategic environment. Second, it adds an important new dimension to the policy discussions on the effectiveness of government grants to increase the services of charitable nonprofit organizations. Charities are not passive receptables of contributions, as they have so often been treated in the past, but are active players in the market for donations. When the government gives a grant to charities, we shoul take into account the behavioral response of the charity itself, as well as the behavioral responses of the individual donors.nonprofit organizations, fundraising, crowd-out, private donations, government grants