A Positive Model of Private Charity and Public Transfers

This paper explores a model where private charity and public transfers are determined simultaneously. In political equilibrium, the government "overprovides" public transfers, transferring more to the poor than altruistic taxpayers prefer. At this equilibrium, private charity is zero. Evidence for this result is found by examining various types of data from the 1920s to the present. While private charity currently exceeds 50 billion, very little of it goes to the poor. I provide evidence that this phenomenon of zero private charity began, as the model predicts, in the 1930s, the beginning of federal intervention in the charity market.