Paying for Altruism: The Case of Organ Donation Revisited

Although many commentators have called for increased efforts to incentivize organ donations, theorists and some evidence suggest these efforts will be ineffective or even could perversely crowd out altruistic efforts. Prior papers examining the impact of tax incentives for donations generally report zero or negative coefficients. We argue these studies incorrectly define their tax variables, and rely on difference-in-differences methods despite likely failures of the requisite parallel trends assumption. We therefore aim to identify the causal effect of tax incentive legislation to serve as an organ donor on living related and unrelated kidney donation rates in the U.S states using more precise tax data and allowing for heterogenous and time-variant causal effects. Employing a synthetic control method, we find that the passage of tax incentive legislation increased living unrelated kidney donation rates by about 52 percent in New York relative to a comparable synthetic New York in the absence of legislation. We show that this causal effect is robust to the exclusion of any particular state as well as to the use of a very small number of comparison states. JEL Classification: I18; K32; C15