Inheritance and Charitable Donations

Abstract

In this paper, we employ a unique new data set (the Philanthropy Panel Study (PPS), a module within the Panel Study of Income Dynamics (PSID)) to test whether the propensity to donate out of inherited wealth is equal to the propensities to donate out of other wealth, earned income, and transfer payments. We find that the elasticity of giving from non-inherited wealth is much greater than from inherited wealth for total giving and gifts to religion, combined causes, people in need, health, education, and other causes. The effects of income derived from inherited wealth and labor income are similar in terms of elasticities, although inherited wealth creates a higher marginal propensity to donate. Transfer income has either a small or no apparent effect on donations.