The Market for Charitable Giving

T hrough good and bad economic times, charitable gifts have continued to roll in largely unabated over the past half century. In a typical year, total charitable gifts of money now exceed 2 percent of gross domestic product. Moreover, charitable giving has nearly doubled in real terms since 1990, and the number of nonprofi t organizations registered with the IRS grew by nearly 60 percent from 1995 to 2005. The market for charitable giving primarily revolves around three major players: Donors provide the resources to charities. Charitable organizations develop strategies to attract resources and allocate those resources. Finally, the government decides (among other issues) on the tax treatment of individual contributions, the level of government grants to various charities, and what public goods to provide itself. This study provides a perspective on the economic interplay of these three actors. I begin by exploring data on aggregate giving patterns: How much is given annually? Who gives? Who are the recipients of these gifts? Focusing on gifts of money in the United States, I fi nd that since 1968, growth in charitable gifts of money roughly doubled the growth of the Standard & Poor’s 500. One interesting pattern that emerges concerns the cyclical nature of giving: while individual gifts are responsive to the economic environment, they are much more sensitive to economic upturns than to downturns. This relationship has led to charitable gifts signifi cantly outpacing the S&P 500 over the last decade. I then turn to an exploration of facts that have emerged from the early years of research in this The Market for Charitable Giving