Are Political and Charitable Giving Substitutes? Evidence from the United States.

This article examines the relationship between political giving and charitable giving in the United States, using microdata from the American Red Cross (ARC) and the Federal Election Commission (FEC) through two natural experiments. The first experiment analyzes the impact of foreign natural disasters as positive shocks to charitable donations, finding that a 34.9% increase in ARC donations corresponds with an 18.8% decline in political contributions, implying a crowding-out elasticity of 0.53. The second experiment exploits geographic discontinuities in political advertising markets, showing that a 10% increase in political ad spending raises political donations by about 0.20% but reduces charitable donations by approximately 0.14%, yielding a crowding-out elasticity of 0.59. These findings suggest that political and charitable giving are close substitutes rather than complements, a conclusion supported by robustness checks using IRS aggregate charitable deduction data and donations to Catholic Relief Services. The study highlights implications for nonprofit managers, political campaigns, and researchers, emphasizing that shifts in one type of giving can significantly affect the other, with potential consequences for disaster relief and electoral outcomes.