Richard Steinberg

Indiana University – Purdue University Indianapolis | IUPUI · Department of Economics

What is the nonprofit sector and why does it exist? Collecting the writing of some of the most creative minds in the field of nonprofit studies, this book challenges our traditional understanding of the role and purpose of the nonprofit sector. It reflects on the ways in which new cultural and economic shifts bring existing assumptions into questio...

Benford’s Law asserts that the leading digit 1 appears more frequently than 9 in natural data. It has been widely used in forensic accounting and auditing to detect potential fraud, but its application to nonprofit data is limited. As the first academic study that applies Benford’s Law to U.S. nonprofit data (Form 990), we assess its usefulness in...

Nonprofit service associations, such as the Lions Clubs, Rotaries, and Kiwanis, provide collective goods. Membership in a service association involves two essential elements: members’ shared interest in the club’s charitable service and private benefits stemming from social interactions with other members, such as networking, fellowship, and fun. W...

Non-profit organizations are hybrids – private but with restricted ownership rights. This defining ‘nondistribution constraint’ reduces incentives to exploit underinformed customers and allows non-profits to depart from profit-maximizing behaviour, although costly enforcement of this constraint limits effectiveness. Non-profits’ GDP share in the Un...

Social finance is now a multibillion dollar market that encompasses ethical investment (including finance for green businesses), community investment to support economic development in deprived areas, ‘impact investing’, investment in developing countries, co-operative and mutual finance, along with a wide range of initiatives in the financing of p...

Managers, donors, regulators and reporters care about fundraising cost ratios (donations divided by costs) despite their many shortcomings. In this paper we discuss the unintended but harmful side effects resulting from the pressure to minimise cost ratios in the areas of compliance and regulatory costs, misleading solicitations and misled donors,...

for helpful discussions on the first phase, and Marc Bilodeau and Jaesoo Kim for the current phase. 'Three-failures theory' postulates that for-profit firms, government agencies, and nonprofit organizations play distinct roles, with each sector specializing in activities that the other sectors fail at. Nonprofits specialize in provision of collecti...

This paper estimates the correlation between the generosity of parents and the generosity of their adult children using regression models of adult children's charitable giving. New charitable giving data are collected in the Panel Study of Income Dynamics and used to estimate the regression models. The regression models are estimated using a wide v...

Voluntary contribution experiments systematically find that contributions decline over time. We use a two-stage voluntary contribution game to investigate whether this decrease is caused by learning or strategic behavior. Using a strategy method we find a robust pattern of declining contributions: contributions in stage 2 are 45 percent lower than...

This synthetic literature review briefly summarizes general literature on principal–agent problems, then shows how this literature has been or can be adapted to look at nonprofit governance, accountability, and performance. It concludes with discussions of differences between agency problems in the for-profit and nonprofit sectors and difficulties...

In this paper, we report experimental evidence on the effectiveness of several techniques of persuasion commonly utilized in direct-mail solicitation. The study is built on theory-based, descriptive models of fundraising discourse and on comparisons of recommended and actual practices related to three dimensions of persuasion: rhetorical, visual, a...

This chapter illustrates the many uses of economics in the design of fundraising campaigns and in donor decision making, providing a nontechnical introduction to the subject for nonprofit managers and fund-raising professionals.

In this chapter, we explore why donations are made to nonprofit organizations instead of other institutions or directly to recipients; how such nonprofit organizations behave; and what is the appropriate public policy toward subsidizing and regulating these entities. We focus on donative nonprofits—organizations precluded from distributing their su...

Incentive contracts based on profit sharing, cost reduction, or other measures of performance no longer need to endanger a nonprofit firm's tax exemption; such measures have been urged for adoption in the nonprofit sector. However, the nonprofit differs from the for-profit sector in that contracts have side effects on the solicitation and offering...

The second edition of The Nonprofit Sector provides a novel, comprehensive, cross-disciplinary perspective on nonprofit organizations and their role and function in society. This new, updated edition keeps pace with industry trends and advances as well as with the changing interests and needs of students, practitioners, and researchers. As before,...

What makes for a good theory in economics? Tastes and opinions differ on this important issue, with some admiring the mathematical elegance and logical completeness of analysis, some admiring the metaphoric insight provided by deep description, and others admiring the development of new analytic tools rather than the application of those tools to n...

New data help to determine whether differences in philanthropic practices are due to race and ethnicity themselves or to a variety of factors that are correlated with these labels.

We characterize the patterns of pricing and rationing when paternalistic nonprofit organizations (either private or governmental) care about the level and distribution of consumer surplus provided to their clients. Equilibrium depends upon marginal cost, the organization's distributional weights, exogenous income levels, and cream-skimming by compe...

The Center on Philanthropy Panel Study (COPPS) reports on the giving and volunteering of more than seventy-four hundred households in 2001 and 2003 and the households' composition, income, and wealth over the previous thirty years. These data will help researchers and fundraisers understand many aspects of philanthropy not previously understood.

In this paper, we employ a unique new data set (the Philanthropy Panel Study (PPS), a module within the Panel Study of Income Dynamics (PSID)) to test whether the propensity to donate out of inherited wealth is equal to the propensities to donate out of other wealth, earned income, and transfer payments. We find that the elasticity of giving from n...

In January 1997, the Indiana University Center on Philanthropy initiated work on a semiannual study of the climate for philanthropic gifts and fund-raising in the United States. This study led to the semiannual publication of the Philanthropic Giving Index (PGI). The PGI measures the climate for philanthropic giving in much the same way that the Co...

Nonprofit organizations are increasingly resembling private firms in a transformation bringing with it a shift in financial dependence from charitable donation to commercial sales activity. This book, first published in 1998, examines the reasons and consequences of the mimicry of private firms by fundraising nonprofits. User fees and revenue from...

In this paper we examine Salamon and Anheier's characterization and testing of alternative theories of the size and scope of the nonprofit sector in different countries. We identify various nuances and refinements of these theories, and we suggest ways in which their validation through statistical testing can be extended and improved. Finally, we o...

This article evaluates economic theories of the non-profit sector by their ability to enlighten our understanding of the scope of inquiry, the determinants of the size and scope of the non-profit sector, and the behavioural responses of donors, volunteers, paid staff and non-profit organisations to changes in their external environment. Adherence t...

We estimate the impact of taxes on donations using a large panel of middle-class taxpayers. Our specification allows estimation of the effects of habits, time shifting, and consumption smoothing on the time path of adjustment and produces plausible simulated adjustment paths to permanent and temporary anticipated tax reforms. We find that taxes det...

This paper analyzes the tax-favored status of charitable donations of appreciated assets using data from the 1985 Statistics of Income individual tax file. The efficiency of favored tax treatment of charitable donations is analyzed by estimating separate price elasticities for total, cash, and property contributions. The results indicate that wealt...

We contrast results from a laboratory experiment in voluntary contributions for a public good using two reward structures with interior equilibria. The first induces a set of Nash equilibria, all sharing the same total donations. The second induces a unique dominant-strategy equilibrium. Apparently, donor confusion over the Nash concept and coordin...

Henry Hansmann's "The Role of Nonprofit Enterprise" (1980) has had a seminal influence on analyses of the law and economics of the nonprofit sector Hansmann argues that the "nondistribution constraint" makes nonprofits an efficient solution infields characterized by contract failure. This article surveys the literature that has extended, criticized...

This article discusses various attempts by economists to model the behavior and performance of nonprofit organizations, and it provides four desiderata of a model suitable for policy analysis: the legal definitions of nonprofit status must be incorporated into the model; the objective function must emerge from the regulatory and competitive environ...

This is a book made of very diverse material, dealing with topics as different as universities and homes for battered women, taxes and human rights, referring to countries as varied as the US, Germany, Japan and Sri Lanka, written by economists, sociologists and political scientists. To assemble all this in one book requires courage, and Professor...

The economics literature on nonprofit utilization of employees and volunteers is reviewed and synthesized. Economic motivations for volunteering and accepting volunteers are explored along with inter actions between gifts of time and of money and the economic value of volunteer labor. Also examined are factors explaining wage differ ences between t...

We estimate the effect of exogenous federal expenditure cutbacks on state social service expenditures and on charitable donations. In the process, we also estimate tax and income effects and explore the impact of community environment and "need" variables. Data consist of a unique three-year panel of aggregate itemized giving by state and income cl...

This paper surveys 24 studies, appearing since Clotfelter's (1985) book, which estimate the influence of tax incentives on personal donations in three countries. Studies employ new surveys, experimental data, and data corrected for tax evasion. Newly available panel data sets obtain conclusions which strongly challenge the traditional consensus tha...

Proponents of the new federalism argue that nonprofit organizations and local governments will fully offset federal social service expenditure cutbacks. The author analyzes this proposition as a competitive game in which donations are motivated by private and public good considerations. The author characterizes the response of political-economic eq...

Although assertions have often been made about the objectives underlying the behavior of nonprofit firms, there has been no empirical confirmation of these assertions. This article proposes a way to infer a nonprofit organization's objective function by estimating the marginal donative product of its fundraising. Panel data estimates derived by usi...

One might expect that increased governmental social-service expenditures would reduce charitable donations, but the direction and magnitude of this effect is theoretically indeterminate. Empirical estimates of this "crowdout" phenomenon are produced from British time-series data. Results suggest that a dollar of gov ernmental social-service expendi...

Without Abstract

Using data from COPPS/PSID, we investigate the effects of different forms and sources of income (labor, asset, welfare, and other transfers) and wealth (home equity and other wealth) on household charitable donations (total, religious, secular, combined causes, and the needy). We find that it is important to disaggregate income and wealth and to di...

Martin Schneider is Professor of Economics at Stanford University. His research interests lie in Financial and Monetary Economics.

I argue that social investors should invest in activities that cannot be reliably sustained through ordinary market transactions. These activities include collective consumption goods, goods with nonverifiable quality, merit goods, and private goods that target groups cannot but ought to be able to, afford. Then I consider government's role in soci...

This paper analyzes the tax-favored status of charitable donations of appreciated assets using data from the 1985 Statistics of Income individual tax file. The efficiency of favored tax treatment of charitable donations is analyzed by estimating separate price elasticities for total, cash, and property contributions. The results indicate that wealt...

Prepared for The National Council of Nonprofit Associations (NCNA). We thank Evelyn Brody, Robert Grimm, Jr., and Woods Bowman for helpful remarks. The authors are researchers, and our perspectives necessarily differ from those of advocates. Although we express our opinions on the strengths and weaknesses of individual arguments, we do not express...