Wednesday, February 16, 2011

Do Churches and Charities Compete for Dollars?

A recent study summarized here (also reported here) says "no." The study finds that individuals who contribute more to churches also contribute more to other charities, and this result is robust to different ways of slicing up the data. The interpretation given is that churches and charities do not compete for money but instead help foster more spending in the other.

My first complaint is that this interpretation misuses the word "competition." Any dollar given to church rather than charity is, at the margin, a dollar not given to charity. There is an opportunity cost, which connotes a kind of competition. Saying that they do not compete is problematic.

My second concern is more substantive. Suppose a person decides to donate $X of her income to what she perceives as good causes. Then the decision of interest is how she should allocate those $X. She might give $X/2 to church and $X/2 to charity, $X/4 to church and $3X/4 to charity, and so on. Also suppose that there is diminishing returns to donating to more than one organization so each person wants to spread out donations, and that there is a cost, e.g., due to increased time writing checks or filing a tax return, to donating to too many organizations. Then the observed pattern is due to different people have different Xs, and not due to a donation to one causing a donation in another. In true, then there is a strict competition between organizations for a portion of people's donations due to a strong substitution effect.

However, other plausible complications can exist, and these are more subtle. Suppose churches teach their adherents to donate to non-church charities. If committed churchgoers, who happen to donate a lot to their churches because of their high commitment, also internalize the message to donate to non-church charities, then they could also donate more to charities than less committed types. We then see people who donate more to church also donate more to charity, but it is not the donations to one that cause the other. Rather, it is a third facto--in this case commitment--that causes high donations to both churches and charities. Sorting this out will require additional study.

What do you think? Does donating to church cause donations in charities? Vice versa? Neither?

9 comments:

  1. I personally believe that donating to a church does not imply that you are more likely to donate to a charity. Some people donate to churches simply because they feel like it's a moral obligation upon themselves to help out their church because they are using their resources directly, or perhaps it's mandated by their religion. Those people may not be so much inclined to donating to charities.

    Naila Rana, econ 17

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  2. Silviu Cherloaba Econ 17 Jackson,K TAFebruary 28, 2011 at 5:25 PM

    It is difficult to come to an exact conclusion.

    As analyzed by Prof McBride, based on economic fundamentals/theory, the
    churches and charities are competing for dollars.

    However, have to consider that churches sometimes advertise for charities. Also, sometimes churches/charities work together therefore
    explaining the correlation between donations.

    Generally, it is beneficial for charities to utilize churches to develop reputations as being legitimate. I would assume that charities advertised by or with churches are going to be trusted by the church goers a lot more than those that aren't. Also, church and church communities is probably one of the strongest channels of advertisement/networking that can be used for many charities.

    Churches also sometimes seek out charities to help impact the community in a positive way. So there are many cases when the churches and charities are working together which can explain the correlation between donations. In this case, the churches and charities are not competing for dollars but rather working together.

    Additionally, the article doesn't give a breakdown of the type of people who donated.

    For example,

    In general, maybe people who attend church and donate to the church are very charitable by nature and will also donate to charities. Therefore explaining the relationship of donations between churches and charities.

    Also, a certain portion of those people are going to be rich philanthropists who donate to a lot of causes, meaning there is not a strong correlation between church donation causing someone to donate to a non-church organization since they are going to donate regardless.

    A certain portion, however, are going to be as mentioned by the previous post by Naila Rana, forced to donate due to their religious belief (Islam pillars of faith for example), which means there is little to no relationship between donating to a church and a non-church organization.

    There are probably many more different types, but there are several sub-categories of donors which can be studied.

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  3. Rick Chao (50057181)February 28, 2011 at 7:14 PM

    Also, it is important to factor in the possibility that churches give to charity as well.
    People may give more to church in order to save the hassle of finding which charities are worth giving to; since the church will already do that.
    However, the amount a church gives to charity may vary amongst different churches. This may also explain why the amount someone gives to church/charity may vary as well.

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  4. Religion can play an important role if donating to church may cause donations in charities. Many religions might influence people to give to charity. They have a moral or spiritual obligation to give. Some people believe in the value of giving, especially if their religion has very strong beliefs in giving. In addition, just like others have posted, some churches may also use their donations that they received to help charities. From personal experience, the church I go to has asked for people to donate so that they can help another organization for a good cause.
    -Kristen Leong Econ17

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  5. I think that donating in church can lead to donations in charities as well. In some cases people might not want to giver more money to a charity because if they are already tithing and giving 10% of their income to the church, they might not feel as obligated to give more money to charity. I think that people could have an opposite opinion on this though. If someone donates a large sum to a charity, they might not feel like they need to tithe at church because they already gave a large amount to a charity, which helps people in need.

    I personally don't think there is competition between churches and charaties. I do think that if people are more committed to a church, they are more likely to donate to both the church and charities. Someone with a higher commitment level in church will most likely donate a higher amount of money, each month, to both churches and charities. People who have a low commitment level, who only show up once or twice a month, most likely don't donate to either a charity or the church. These people would be known as free riders because they don't contribute with the rest of the congregation, when it comes to donating or tithing in church.
    -John Walberg, Econ 17
    (71982294)

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  6. For this situation, we can obviously observe different trends and correlations between attending church and donating to different non-religious charities. However, I have to side on neither. This is because causality is very hard to define because like Professor McBride mentioned in his example including the third-party factor of church commitment. There is a large number of third-party factors that need to be considered per individual making donations. Some examples that interfere with directly identifying causality are non-religious individuals that make contributions to these charities. This makes it very difficult to say that church membership causes more non-religious donations to charities. In the other hand, people making large contributions to different charities cannot be labeled as church members because it is not always true about every single individual.

    Overall, we can try to find strong correlations between these church membership and the amount of contributions; however, defining causality is not likely. This is hard because of the unlimited amounts of third-party factors involved.

    -Andres Yu Hong, Econ 17
    (ID#82057277)

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  7. -Gabriele Szeibert, Econ 17March 8, 2011 at 10:00 AM

    I don't believe there should be a competition between churches and charities for money due in most part because donating to churches is in a sense donating to a charitable cause in the first place. Charities aim towards helping provide relief and assitance to those in particular need, and one can view donating to a church in a similar way.

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  8. It is very difficult to know the substitution effect of donating to church vs. donating to a charity. There are too many factors to determine the causation effect. If a person has heart to donate then donating to one place or another will be irrelevant because that person will likely donate to both places. But there also maybe a convenience factor. People who go to church on a regular basis will most likely donate to that church because they have the opportunity to do it at that moment. But they may not go out of their way to find a charity to donate to if it is not available to them.

    Another factor why people may donate more to a church than to charities maybe due to the preachings of the prosperity gospel preached at many churches and third world countries. The prosperity gospel states that God will provide material and health blessings to those who give greatly to Him through monetary sacrifice. As defined in Wikipedia, "Believers have a right to the blessings of health and wealth and that they can obtain these blessings through positive confessions of faith and the 'sowing of seeds' through the faithful payments of tithes and offerings." So preachers would go around third world countries where resources are scarce and convince the poor to give up everything they so that God can bless them monetarily. There people are not the type to donate to charities because they have limited resources but they will donate to this church looking for riches in return. This maybe a reason why there is an increase in donation to a church than to charities. A charity cannot promise monetary blessings in return as preached by an evangelist. Hence, The poor are more willing to donate to a church for an expected return.

    But if a person has the monetary means and the heart to donate then that person will donate to both the church and to charities. Though some people maybe manipulated by the pulpit to pay into that church some will do it willingly. And those are the type to donate to charities as well. As religious capital increases through their religious investments, these people will be more willing and more committed to donate into that church as a substitute for donating to charities.

    Lastly, I knew of a church that wanted to construct a brand new church building. The pastor of this church convinced his small congregation to donate more than usual to build this church. So many people took out a second mortgage against their house to finance the building of this church. In this case, the congregation went beyond what they would usually donate to construct this church. Was this a manipulation on the part of the pastor to get his way? Or did the congregation want to donate out of their hearts to construct this building. Its hard to tell. I think it was a little bit of both. As people's religious capital increases there is a direct coloration to an increase in tithing. I believe for these reasons church donation will always be higher and even a substitute for charity giving.

    Alejandro Lee
    Econ 17 (000763397)
    TA: Kip Jackson

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  9. I'm glad to see this post get some comments. As I mentioned in my original comments, there is something funny about the wording. Let me try to illustrate with a different example. I love my wife and my children, and my love for one fosters my the love for the other, but my spouse and child still compete for my attention at the margin. My time is scarce, just as the potential donor's money.

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