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“Looking good by doing good”

January 30, 2009
Illustration by Jac Depczyk Economist.com

Illustration by Jac Depczyk Economist

“Looking good by doing good,” an article from Economist.com sheds a new light on the role incentives have on shaping an individual’s decision to donate or not to donate to charity.  It is true that today philanthropic donations are more than three times of what they were in 1965. And while most of the donations come from rich magnates, nearly 89% of all average American households also donate to charity.

There are several reasons to explain why donations come about. Tax incentives are probably one of the major reasons that encourage people to donate money as they can provide monetary gain to the individuals.  However, it is conceivable that payments made for certain types of donations can also spur charity.  For example, participation in experiments and blood drives encourage giving. However, experimental studies done by a few economists have shown that monetary incentives can actually reduce charitable giving. Individuals will forego personal monetary gain if it has higher opportunity costs.

Behavioral economists have recently emphasized the role of image building incentives (also known as “image motivation”) in promoting philanthropy among households and individuals.  People like to be acknowledged and look good in front of others. According to this theory, private donation is expected to be positively correlated with the publicity and acknowledgment received. It is as if people donate just to have a better public image. This is not to say that donating for a better image is bad; there is no harm with image motivation promoting charity so long as the donation is to a recognized and a well known charity.

In my opinion, incentives discussed in this article apply to South Asian charitable giving as well. The prestige and recognition one gets from the South Asian community from making a donation certainly builds an image. In spite of image motivation, I believe that another reason for other South Asian donations is correlated to the fact that many South Asians are inclined to donate to their family and communities back in their country.

I talked to some “Asian – American” classmates of mine at Indiana University as well as my parents back home in Indianapolis about what they thought made them or other South Asians donate more money to charity.  As expected, their answers reflected the incentives mentioned above.  I have come to the conclusion that there really is not any “exclusive” difference between the incentives that cause Americans and South Asians to donate. Their intentions for donations are for similar reasons. However, this raises important questions that we should all think about.

Would donations to South Asian communities increase if there were more recognition of contributions in local communities here and beyond?

And if donations build a better image, would donations by South Asian communities increase to American charities?

In your opinion, are South Asians seen as keeping their identities as donors anonymous? Or not?

– P

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