By Matthew Kredell
New research from USC Price School of Public Policy Assistant Professor Nicolas Duquette shows that when the rich get richer, they don’t donate more to charitable causes.
Prevailing narratives of charitable giving in history, economic theory and philanthropic thought all agree that the more people have, the more they give — and this is a mitigating factor on inequality.
Duquette’s paper “Inequality and Philanthropy: High-Income Giving in the United States 1917-2012” shows that historically, when inequality has been high, giving as a share of income has been relatively low. On the other hand, when inequality was low, the rich gave a high share of their incomes.
“The share of income given goes down as inequality goes up, which is the opposite of what you would intuitively expect,” Duquette said.
The bulk of the paper investigates, in great detail, whether the negative philanthropy/inequality association holds conditional on obvious explanations, concluding that it does. Increases in giving do not keep up with increases in income.
Toward the end of the paper, Duquette lays out speculative reasons for this disparity as areas that future research could address. Among those reasons: what people are expected to give may be less important than what they consider to be a lot to donate; and the more money one has, the more socially distant they become from their neighbors and the needs of society.
“When there’s more inequality, it possibly creates more distance that people have to overcome,” Duquette said
Duquette argues that this relationship between inequality and charitable giving is essential for understanding the development of the American economy and the likely future of its increasingly contentious income distribution.
“I think the biggest lesson, speaking as someone who works at a policy school, is that there is a perennial idea in certain policy circles that philanthropy is going to fill the gap where the government is withdrawing or refusing to engage, and that’s just false,” Duquette said. “The idea that charitable billionaires like Bill Gates and Warren Buffet are going to come in and make up for policy changes is not the case.”
Gates and Buffet helped launch the Giving Pledge in 2010 to inspire wealthy people to give at least half their net worth to philanthropy, either during their lifetime or upon their death. The campaign’s website notes that there are currently 184 pledgers, but that isn’t enough to close the inequality gap, according to Duquette’s data.
“I’m not trying to knock Bill Gates and William Buffet, because they are making a difference — but they also are not representative of the broader set of high-income people,” Duquette said. “I write a lot about the top one-tenth and one-hundredth percentile of households in this paper. There are only between 10,000 and 20,000 households in the top one-hundredth percent, but that’s a lot relative to the Giving Pledge.”
The paper, which is available online, will be published in the journal, Explorations in Economic History.
Associate Professor