Does one size fit all in the non-profit donation production function?

We attempt to reconcile two puzzles in the non-profit (NP) literature: (i) studies often find that NPs grossly underspend on fundraising; (ii) crowd-out effect estimates of government grants on private donations vary widely, suggesting both crowd-out and crowd-in. We examine these impacts via a semi-parametric instrumental variables strategy. We find heterogeneous effects across NPs, fundraising efforts, and government grant intensity. Smaller NPs appear to drive the presence of crowd-out; estimates for the marginal productivity of fundraising are consistent with leading theories of NP optimizing behaviour.

Automated summary

This study attempts to reconcile two puzzles in the non-profit literature: (i) the finding that non-profits often underspend on fundraising and (ii) the varying estimates of the crowd-out effect of government grants on private donations, suggesting both crowd-out and crowd-in. Using a semi-parametric instrumental variables strategy, the study finds heterogeneous effects across different non-profits, fundraising efforts, and government grant intensity. Smaller non-profits appear to drive the presence of crowd-out, and the estimates for the marginal productivity of fundraising align with leading theories of non-profit optimizing behavior.