Percentage philanthropy – an experimental research

Abstract

In Central and Eastern Europe, the presence of the civil sector has significantly increased since the early 90´s. To help the fundraising of the nonprofit sector they worked out tax allowances for the affected organisations and for supporters as well. One of these instruments is the percentage system, where taxpayers could dispose over 1 or 2 percent of their personal income. The author of this paper executed an experimental research project to explore how the percentage system could inspire altruistic behaviour of individuals and whether there is any crowding out effect of this kind of governmental contribution. The research is based on experimental research where the supply of public goods was observed with and without the possibility of the special form of contributions - the percentage system. Through the inquiry, groups have been examined through 10 rounds under two different situations to determine the Nash equilibrium with and without the presence of the percentage system. The experimenter´s role (illustrating the role of the government) was to multiply and reallocate contributions after being informed about individuals´ decisions. Consequently, this experiment showed that the introduction of the percentage system does not lower significantly the level of individual contributions from income. Moreover, a little increase could be observed in the first round of the experiment´s second part. Other thought-provoking situations occurred through the process like the difference between the behaviour of men and women such as their reaction to the new situation.