Charitable Donations in the Lab

Charities are shedding jobs at double the rate of the public sector as many voluntary organisations face deepening financial distress as a result of recession, cuts in government spending and rising costs. The voluntary sector shed more than 70,000 jobs in the year of 2011 following financial crisis, according to analysis of employment data by the National Council for Voluntary Organisations (NCVO), an umbrella group for the charitable sector[1]. Donations to most charitable organizations generally come from individuals (e.g. from a fundraising appeal or given as a legacy), from companies, or from charitable trusts and foundations. Gifts and individual donations are a particularly important source of income for charities and can attract tax relief. Raising funds however can be time-consuming and costly which may render effort of charitable organizations futile.

Research in behavioural economics has used various tools to test for the effectiveness of donation raising strategies. Most of the studies use student populations and some have argued that students behave less pro-socially and are more money motivated than the general population[2],[3] and hence are not representative of what is going on in real world. A recent study has shown that students participate in economic experiments solely to earn money as the recruitment rates have been found to be extremely low when money was not mentioned in the recruitment email[4]. Yet we know of an abundance of studies that show that in completely anonymous settings, people choose to give money to others[5],[6], reject unequal offers at the risk of not earning any money at all[7],[8], cooperate with others at the risk of being taken advantage of[9],[10] and return money back if someone has entrusted in them[11].

Some would argue that the observed pro-social behaviour is due to social framing of the experiments where heuristics kick in and participants behave according to the norms learned in real life[12]. Others suggest that experimenter demand effects dominate the choices of participants and they feel the need to “help” the experimenter.[13] Self-image concerns have also been shown to affect pro-social actions people take[14]: people may simply not want to feel selfish let alone to be seen by others as a selfish person. Yet most of the literature argues that we, as humans, have inherent social preferences and care about other people’s well-being [15],[16].

Recently, we conducted an experiment which provides a robust test on the existence of social preferences towards the charity organization of choice. In our experiment, we had two jobs that participants could work on simultaneously within a limited time period. Both of them were real effort jobs that were quite boring and tiring. We paid a piece rate of £0.10 for each task that participants completed in the “selfish” job that benefited only the participants. The other job was a “social” job which paid participants a fixed amount for completing a minimum number of tasks. It also paid out a donation to a charity that participants chose as their favourite charity at the beginning of the experiment before knowing what the experiment was about. The donation of £0.10 was made to a chosen charity for each completed task of the social job exceeding the minimum. By asking participants to complete a minimum in the social job, we tried to eliminate or at least decrease experimenter demand effect.

With this kind of design, participants had a direct trade-off between working for themselves and earning money from the “selfish” job and working above minimum for the “social” job and earning donations to a charity. The trade-off emerges from the limited time given to subjects to work on the jobs. We were expecting that given this trade-off, our participants would be much more selfish and donations would be much less compared to the existing studies in the literature[17],[18],[19]. We find that our participants donated on average £1.75 ranging from £0 to £7. In total, £255.4 was donated to 23 charitable organizations.

The pie chart shows split of donations across the charities, with the highest donation to Save the Children, followed by Cancer Research and World Wildlife Fund. The organizations whose names are mentioned in the pie chart are the ones that participants could choose from a drop down menu. It has been shown that offering people choice increases donations and is a useful tool to boost philanthropy[20]. So we gave participants 6 organization to choose from or they could indicate their own favourite charity. 23 participants mentioned other charitable and non-profit organizations such as Mind, Guide Dog, Wikipedia and Vegan Society as their favourites and could earn donations for them.

So why did our participants donate and trade-off their own material benefit to work on “social” job? We conducted econometric analysis to test whether gender, academic discipline and self-reported social preferences predict whether and how much people donate.a We find no effect of either variable on the donations made. Men were as pro-social as women, Business and Economics students behaved similarly to Social and Hard Sciences students and participants who reported that donating to charities is very important donated as much as those who reported that donating is not very important. The only significant predictor of donations was how good a participant was in the job in the practice stage at the beginning of the experiment. The high performers in the social task tended to self-select into the social job and donated more than the low performers. Moreover, we found an interesting gender difference when we looked at our data more closely.

The 116 participants in our experiment were divided into 2 treatment conditions. In the Charity treatment participants just earned donations for their chosen charity per each task completed in addition to the minimum required. In the CharityImage treatment, the top 3 donors in every session were called out and received a “Thank You! Certificate” for donating the most amount of money. This was a test of social image being a motivator of acting pro-socially.

What we find is quite interesting. Donations are slightly higher in the treatment where top donors receive a certificate but the difference is very small and not statistically significant. However, when we separate our participants by gender, we find that men are more motivated to donate in the CharityImage treatment than in the Charity treatment, whereas women donate equal amounts in both treatments. Men donate on average £2.52 in the CharityImage and £1.67 in the Charity treatment. Women donate £2.38 in the CharityImage and £2.03 in the Charity treatment which is not significantly different. The reason for this significant difference between treatments for men can be double-fold: both the image concerns may have motivated men more than women as well as competitive framing of the social job may have bolstered male genes for competition[21].

Further questions emerge that future research can address: e.g. is it the award or the competitive framing that motivates men to work more in the social job? And will people donate same amounts if they are assigned a charity to work for rather than have chosen one?

Our findings are important piece of evidence showing that charitable organizations can boost their donations by publicizing donations of the highest donors and adding a competitive flavour to the donation process. This will not hurt the donations by women but can help to increase donations by men. The same is true for organizations involved or considering corporate social responsibility projects to boost productivity especially if the majority of their workforce consists of men. Our results show that social jobs can also be highly productive when given a free choice to work for one’s self and public as long as the social aspect of the job is salient enough.

Notes:

a Answer to the question “How important it is to donate to charities and other social institutions?”

b Our project had more treatments unrelated to the discussion in this blog. The report on all of the treatments is available here.

01/02/2016

References

[1] FT: Charities in Crisis as Austerity Bites. Available at http://www.ft.com/cms/s/0/be15e318-7c26-11e1-9100-00144feab49a.html#ixzz3wwFKlOlq

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[12] Rand, D. G., Peysakhovich, A., Kraft-Todd, G. T., Newman, G. E., Wurzbacher, O., Nowak, M. A., & Greene, J. D. (2014). Social heuristics shape intuitive cooperation. Nature communications, 5.

[13] Fleming, P., & Zizzo, D. J. (2015). A simple stress test of experimenter demand effects. Theory and Decision, 78(2), 219-231.

[14] Tonin, M., & Vlassopoulos, M. (2013). Experimental evidence of self-image concerns as motivation for giving. Journal of Economic Behavior & Organization, 90, 19-27.

[15] Charness, G., & Rabin, M. (2002). Understanding social preferences with simple tests. Quarterly journal of Economics, 817-869.

[16] Bowles, S., & Polania-Reyes, S. (2012). Economic incentives and social preferences: substitutes or complements?. Journal of Economic Literature, 368-425.

[17] Tonin, M., & Vlassopoulos, M. (2010). Disentangling the sources of pro-socially motivated effort: A field experiment. Journal of Public Economics, 94(11), 1086-1092.

[18] Tonin, M., & Vlassopoulos, M. (2014). Corporate Philanthropy and Productivity: Evidence from an Online Real Effort Experiment. Management Science.

[19] Reinstein, D., & Riener, G. (2012). Reputation and influence in charitable giving: An experiment. Theory and decision, 72(2), 221-243.

[20] Schulz, Jonathan, Petra Thiemann, and Christian Thoeni. Defaults in charitable giving. No. 2015-06. 2015.

[21] Niederle, M., and Vesterlund, L. "Gender and competition." Annu. Rev. Econ. 3, no. 1 (2011): 601-630.