Essays on Public Good Contribution

Abstract

This thesis explores some theoretical and empirical issues in the voluntary contributions to public good. Chapter I contains a brief motivation and introduction. In chapters II and III, we analyze two non-cooperative methods for either enhancing or mitigating externality-causing activities. Chapter II deals with positive externality in the public good contribution context, and chapter III with negative externality in the pollution abatement context. Chapter IV contains an empirical analysis of charitable donations by the elderly.

Chapter II models the so-called ``corporate challenge gift'' used in real world fund-raising, and adopts the concept to voluntary contributions to public goods more generally. We model the process as a sequential game in public good contributions. One of the agents sets a quantity-contingent matching scheme to leverage higher contributions from the other players. Under the assumption that the preferences of agents are public information and the assumption that the scheme setter can commit to the matching plan, we show that the scheme brings efficient levels of total contributions to the public good.

Chapter III applies some ideas from a joint work with Professor Robin Boadway and Professor Jean-Fran\c{c}ois Tremblay on ``Commitment and Matching Contributions to Public Goods'' to the issue of reducing negative externality-causing activity. In particular, it adapts both the Guttman-Danziger-Schnytzer type of rate-matching mechanism and the quantity-contingent matching method for public good contributions to the international pollution abatement problem. In a simple two-country model, we find that both matching schemes induce the countries to internalize the negative externality imposed on the other country. However, perhaps due to the lack of enough policy instruments, they cannot equate the marginal costs of abatement across the countries, leaving room for Pareto improvement. This further improvement can be achieved if the two countries also contribute to a conventional public~good.

Chapter IV is an empirical exercise on some positive externality-generating activities by the elderly. It attempts to document the charitable giving of money and time by people aged 60 or above in the 2003 PSID data for the United States and analyze the influences of some economic and demographic factors on these activities. Income, wealth, the subjective rating of health status, and years in school are found to have statistically significant impacts. Income and wealth appear to have distinct influences. The tax price of money donation also has a statistically significant effect on money donations.