Unintended Consequences: The Effect of Education Policy Announcements on Online Philanthropy

Abstract

Over the last two decades, grassroots altruism, enabled through online platforms such as DonorsChoose.org, has resulted in the successful funding of numerous essential public school projects across the country. While such channels become critical fundraising mechanisms, there is an unintended possibility of the crowding out of these sources by governmental initiatives that aim to address public school welfare and quality of education. In this study, with a focus on major public policy announcements, we examine whether there is an unintended effect of external measures, such as the signing of the Every Student Succeeds Act (ESSA), on grassroots altruism, as observed on online philanthropy platforms. We surmise that, in such platforms, donors could become complacent and take comfort in the cognizance of an external agency addressing the problems they care about — we term this the “savior effect”. Importantly, from our analysis of panel data on an education crowdfunding platform, we find (a) a decline in donations toward public school projects on the platform, and (b) that donations become more local, disproportionately impacting schools with high concentrations of low-income and minority students, which receive fewer instructional resources to begin with. Our work has important policy implications for public schools, donor communities, and online fundraising platforms.