Charity, Impure Altruism, and Marginal Redistributions of Income
Warm–glow utility mitigates concerns that public giving crowds–out private giving dollar–for–dollar. Warm glow also means that utility is decreasing in the giving of others, ceteris paribus, and the willingness to pay for altruism is smaller (at the margin) if altruistic households have a positive willingness to pay for warm glow. Consequently, a marginal redistribution of income that passes the Pareto test may fail the test if altruistic households receive warm glow. Numerical evaluation shows that passing the Pareto test is very sensitive to cross–price elasticities between charity and labor supply, the elasticity of charity with respect to warm glow, the tax rate of the rich, and the fraction of the population that is rich.
||Charity, Impure Altruism, and Marginal Redistributions of Income
National Tax Journal (Jun, 2009)