To Give and Give Not: Corporate Philanthropy, Government Aid, and Political Polarization

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In this study, we examine the distributional consequences of corporate philanthropy. We argue that the strategic nature of corporate philanthropy means that corporate donations will go disproportionately to the more economically influential sections of society who constitute key stakeholders for for-profit firms. Private provision to these influential communities will tend to crowd out government transfers however, with this reduction in government aid affecting even those communities that do not directly benefit from corporate philanthropy. As a result, corporate philanthropy will have a socio-politically polarizing effect. We test and find support for our arguments by examining corporate foundation giving in the US from 2003 to 2011. In particular, we show that increasing differences in corporate donations are associated with increasing political differences, as reflected in US presidential elections from 2004 to 2012. Our study thus suggests that corporate philanthropy may act as a regressive and polarizing force, and highlights the need to think more carefully about who corporate philanthropy benefits and how the gains from it are distributed.