335/2017 Miguel Almunia, Ben Lockwood and Kimberley Scharf

This paper estimates the tax-price elasticity of giving using UK administrative tax return data, exploiting variation from a large tax reform. We estimate both the in- tensive and extensive margin elasticity, using a novel instrumental variables strategy. Then, we derive new conditions to evaluate the welfare consequences of changes in the generosity of the subsidy to donations. We find a small intensive-margin elasticity of -0.2 and a substantial extensive-margin elasticity of -0.8, yielding a total elasticity of about -1. These estimates mask considerable heterogeneity: high-income individuals respond more on the intensive margin, while the extensive-margin response is stronger among low-income taxpayers.

Behavioural Economics and Wellbeing

Journal of Public Economics

https://doi.org/10.1016/j.jpubeco.2019.104114