Choosing to give more: experimental evidence on restricted gifts and charitable behaviour

Abstract

It is common for charitable organizations to allow donors to place material restrictions on their gifts. Nonprofit firms and fundraisers generally believe that allowing gift restrictions will increase donation revenue. Restricted gifts are costly to the nonprofit firms because of increased management expenses and an inability to reallocate gifts to higher valued uses. We report the results of an experiment which tests the influence of charitable gift restrictions on donor behaviour. We find that allowing restricted gifts significantly increases the amount given in a laboratory setting. However, we find no evidence that grant restrictions increase the probability of giving.

Keywords:

• restricted gifts
• charity
• donations
• nonprofit
• experiment

JEL Classification:

• D64
• L31
• C91

Acknowledgement

The authors thank Carter Jones, Kley Sippel and Sara Watson for their valuable research assistance.

Notes

¹ Gift restrictions are typically governed under common contract law. Legal enforcement against nonprofit organizations is historically the domain of the state attorney general (Freemont-Smith, 2004). More recently, donors are increasingly willing to litigate directly against charities if they violate documented grant restrictions (Blum, 2002).

² Instructions, charitable organizations list and survey available upon request.