Statutory Tax Rate Reform and Charitable Contributions: Evidence from a Recent Period of Reform.

This paper uses a model of changes in Individual contributions, measured over a period of statutory tax rate reform, to estimate the price elasticity of contributions. This type of model reduces the omitted variable bias and econometrically dominates the traditional, single-period model of contributions. The basic empirical findings are that the price elasticity of giving is quite small, and that the smallness of the elasticity estimate cannot be attributed to a lagged adjustment of giving to changing tax parameters. Additionally, the analysis - shows that although contributions are not elastic with respect to current price, they are sensitive to anticipated future changes In price. That Is, there is substantial substitution between contributions of different periods when a future tax rate (price) change is anticipated.