Monday, November 12, 2012
Jeffrey R. Brown (Illinois - Department of Finance) and his co-authors have posted The Supply of and Demand for Charitable Donations to Higher Education. Here is the abstract:
donations are an important revenue source for many institutions of
higher education. We explore how donations respond to economic and
financial market shocks, accounting for both supply and demand channels
through which these shocks operate. In panel data with fixed effects to
control for unobservable differences across universities, we find that
overall donations to higher education – and especially capital donations
for university endowments or for buildings– are positively and
significantly correlated with the average income and house values in the
state where the university is located (supply effects). We also find
that when a university suffers a negative endowment shock that is large
relative to its operating budget, donations increase (demand effects).
This is especially true for donations earmarked for current use. We
conclude by discussing the importance of understanding how donations
respond to economic shocks for effective financial risk management by
colleges and universities.
Institutional subscribers to the NBER working paper series, and residents of developing countries may download this paper without additional charge at www.nber.org.