Using field experiments in the economics of charity.

Author:List, John A.
Position:Research Summaries

The experimental approach in scientific inquiry is commonly traced to Galileo Galilei, who pioneered the use of quantitative experiments to test his theories of falling bodies. (1) Extrapolating his experimental results to the heavenly bodies, he pronounced that the services of angels were not necessary to keep the planets moving, enraging the Church and disciples of Aristotle alike. For his efforts, Galileo is now viewed as the Father of Modern Science. Since the Renaissance, fundamental advances making use of the experimental method in the physical and biological sciences have been fast and furious. (2) Within economics, the use of controlled experiments has steadily increased, fueled by the exploration of important economic phenomena in the laboratory more than one half century ago.

Although laboratory experiments have dominated the experimental landscape in economics, the past decade has witnessed a significant surge in studies that gather data via field experiments. In economics, field experiments occupy an important middle ground between laboratory experiments and studies that use naturally occurring field data. (3) This is convenient because, on the one hand, economic theory is inspired by behavior in the field, so we would like to know if results from the laboratory domain are transferable to field environments. Alternatively, because it is sometimes necessary to invoke strict assumptions to achieve identification using naturally occurring data, we wonder whether similar causal effects can be found in studies that have different identification assumptions.

Field experiments can play an important role in the discovery process by allowing us to tackle questions that are quite difficult to answer without use of randomization in a field setting. They also can serve an important complementary role--similar to the spirit in which astronomy draws on the insights from particle physics and classical mechanics to make sharper insights, field experiments can supplement insights gained from lab and naturally occurring data. To date, field experiments have shed insights on areas as diverse as tests of auction theory, tests of the theory of private provision of public goods, tests that pit neoclassical theory and prospect theory, tests that explore issues in cost/benefit analysis and preference elicitation, tests that explore competitive market theory in the field, tests of alternative incentive schemes in developing nations, and tests of information assimilation among professional financial traders. (4)

In the remainder of this research summary, I will summarize field experiments within the realm of the economics of charity, with an emphasis on my work, completed with several colleagues.

Charitable Fundraising

The charitable marketplace represents an interesting set of actors, which might be usefully parsed into three distinct types. (5) First, is the Government, which decides on tax treatment of contributions and the level of grants to charities. This insightful literature includes studies that explore crowding out, and studies that measure responsiveness of giving to price changes. (6) Second are the donors, who provide the resources to produce public goods. The final set of actors is the charitable organizations, which develop strategies to attract resources to produce public goods. The economic interplay of these three actor types represents a vibrant area of research.

My own research has focused on studying the relationship between...

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