Religious Giving, Non-religious Giving, and After-life

Topics in Economic Analysis & Policy Volume 5, Issue 1

2005

Article 13

Religious Giving, Non-religious Giving, and After-life Consumption Wen-Chun Chang∗

∗

National Taipei University, [email protected]

c Copyright 2005 by the authors. All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of the publisher, bepress, which has been given certain exclusive rights by the author. Topics in Economic Analysis & Policy is one of The B.E. Journals in Economic Analysis & Policy, produced by The Berkeley Electronic Press (bepress). http://www.bepress.com/bejeap.

Religious Giving, Non-religious Giving, and After-life Consumption∗ Wen-Chun Chang

Abstract Religious giving has been argued to be different compared to non-religious giving, because it influences after-life consumption while contributions to non-religious organizations are irrelevant to after-life consumption. The study herein examines this theoretical argument by investigating the relationships between age and religious and non-religious giving using the data of the Survey of Social Development Trends from Taiwan. From categorized contributions, this study estimates the effects of age, income, and price of giving on religious, charitable, academic, medical, and political contributions, as well as on the probability of providing volunteer work and the frequency of religious participation. The findings suggest that the positive relationships between age and the level of giving are stronger for religious and charitable giving while the positive effects of age on academic and medical giving are much weaker, and there is no significant relationship between age and political giving. That is, religious giving and charitable giving are closely related to afterlife consumption, but the effects of age on academic giving and medical giving are considerably different. Moreover, older people are more likely to provide volunteer work and attend more religious activities than younger individuals. Contributions to religious and charitable groups are positively related to contributions to academic, medical, and political organizations. KEYWORDS: religious giving, non-religious giving, religiosity

∗

Department of Public Finance,National Taipei University E-mail:[email protected] The author thanks Professor Thomas Lemieux, and two reviewers for valuable comments to this paper.

Chang: Empirical Evidence from Taiwan

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1. Introduction Even though a person making a religious or non-religious contribution to non-profit organizations often enjoys a tax deduction, there is a difference from a theoretical perspective. According to Azzi and Ehrenberg (1975), a household chooses its allocation of time and money to secular and religious commodities so as to maximize its intertemporal utility which depends on secular and after-life consumptions. Their model implies that the time and money allocated to religious activities affect the level of after-life consumption. Thus, religious giving influences after-life consumption, but non-religious contributions are not correlated with after-life consumption. Given this theoretical background, it has been argued that religious giving is fundamentally different from non-religious giving, because religious giving increases with age. However, non-religious giving has no relationship with age. Some findings of earlier empirical studies tend to support the above theoretical argument (Azzi and Ehrenberg, 1975; Iannaccone, 1998; Hrung, 2004), while others are not entirely consistent with the model’s prediction (Joulfaian, 1991; Clain and Zech, 1999). However, these studies mostly rely on data from Western Judeo-Christian countries, and so far, very few studies explore the relationship between religious giving and age by using data from an Eastern-religion country. Unlike Western Judeo-Christian countries, people of an Eastern-religion country such as Taiwan are mostly affiliated with folk beliefs, Buddhism, and Taoism. With substantial differences in religious affiliation, it is still unclear how age affects religious and non-religious giving for an Eastern-religion country. Religious giving has long been an important part of all contributions to non-profit organizations in Taiwan. About 54% of all donors have given money to religious organizations with approximately an average amount of NT$6,000 yearly.1 Over 70% of Taiwan’s total population is affiliated with folk beliefs, Buddhism, and Taoism, while only about 7.2% of its inhabitants adhere to some 1

According to the Survey of Social Development Trends, Taiwan area, 2003.

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Vol. 5 [2005], No. 1, Article 13

form of Christianity. Earlier studies (for example, Hrung, 2004) using U.S. data suggest that while religious and non-religious contributions both increase with income, only religious giving increases with age. However, given the difference in religious adherence from Western Judeo-Christian countries, there is no sufficient evidence to support that religious giving also has a positive relationship with age for an Eastern-culture country. Therefore, the purpose of this paper is to fill this gap by examining the relationships between age and religious and non-religious contributions for a country dominated by Eastern religions. Moreover, the complementarities between religious giving and participation, and the crowding effect of religious giving on non-religious giving are also investigated. 2. Literature review and background Previous studies on contributions to non-profit organizations mostly focus on estimating the price elasticity of giving (e.g. Clotfelter, 1985; Steinberg, 1990; Randolph, 1995; Barrett et al., 1997; Auten et al., 2002). This focus is caused by the fact that contributions to non-profit organizations can be reported as itemized deductions allowed for by tax codes. Results from these previous studies suggest that the price elasticity is elastic and that the tax policy of lowering the price of giving with a deduction is effective in encouraging contributions. By employing the concept of Becker’s (1965) household production, Azzi and Ehrenberg (1975) is the first attempt to analyze religious behaviors with an economic approach based on an individual’s rational choice. In their theoretical framework, household participation in religious activities is analyzed in the context of a multi-period model for a household in determining the allocation of time for maximizing its lifetime and “afterlife” utilities. The afterlife consumption becomes partially a function of the household’s investment of members’ time in religious activities during their lifetimes. Their model suggests a substitutive relationship between time and money is devoted to religion, and religious giving increases with age as long as the marginal product of religious activity does not decrease with age. http://www.bepress.com/bejeap/topics/vol5/iss1/art13


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Ever since Azzi and Ehrenberg (1975), a large amount of empirical literature has emerged to investigate a wide range of topics on religious behavior. Some empirical studies spotlight the positive externalities generated by religious participation by examining the relationship between religious activities and social misbehaviors (Lipford et al., 1993; Hull and Bold, 1995; Huang, 1996; Berggren; 1997). Findings of these studies appear to support the negative relationship between religious participation and social misbehaviors. Other studies pay attention to the relationship between religious giving and participation. Sullivan (1985), Olson and Caddell (1994), Forbes and Zampelli (1997), Iannaccone (1997), and Dahl and Ransom (1999) find a positive relationship between religious giving and attendance, and they suggest there is a complementarity between giving and participation. By contrast, Gruber (2004) finds strong evidence that religious giving and religious attendance are substitutes by using data with a long time frame so as to exploit the dramatic variation in the subsidization of charitable giving in the U.S. over time, across income groups, and across states. Clain and Zech (1999) test whether churchgoers’ contributions of time and money are complements and whether churches are in competition with other charitable organizations for church members’ contributions. They find positive relationships between religious giving and participation as well as between religious giving and non-religious giving. However, there is no relationship found between age and religious giving in their study. Joulfaian (1991) examines the effects of an estate tax on charitable bequests and finds a positive relationship between age and charitable bequests. Hrung (2004) divides total charitable contributions into religious and non-religious giving to examine their relationships with age. He finds that contributions to religious organizations increase with age, but there is no relationship between age and contributions to non-religious organizations. Hrung’s (2004) results are consistent with theoretical predictions that religious giving is assumed to directly influence after-life consumption, while non-religious giving is not related to after-life consumption.


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Vol. 5 [2005], No. 1, Article 13

Religions in Taiwan are polytheistic and syncretistic. Among various religions, folk beliefs, Buddhism, and Taoism have been considered as the traditional religions in Taiwan.2 Buddhism entered Taiwan before the arrival of the Dutch in 1624, and its popularity has been steadily increasing ever since immigrants from the Fukien and Kwangtung areas of mainland China brought Chan Buddhism into Taiwan during the Ching dynasty. Even though Taoism is an indigenous Chinese religion, it also became widespread as early immigrants from mainland China came into Taiwan from across the strait. The folk beliefs of Taiwan are very similar to those of the Fukien and Kwangtung regions, as immigrants coming across to Taiwan in the late Ming and early Ching dynasties preserved the traditional forms of their home regions in their basic folk beliefs. By contrast, Christianity first penetrated Taiwan when the Dutch arrived with the Protestant religion over 300 years ago, Catholicism came to Taiwan through Spain, and the Eastern Orthodox religion arrived through Japan. The beliefs regarding after-life in Taiwan’s traditional religions share some common grounds with Western Judeo-Christian religions. Folk beliefs in Taiwan are a mixture of ethical ideology and philosophy of Confucianism, Buddhism, and Taoism. In the mixture, Confucianism is often considered to be a system of social and ethical philosophies that emphasize ritual actions beyond the formal sacrifices and religious ceremonies as being courtesies and accepted standards of behaviors in everyday life. With the system of Confucian values, the basis of human civilization for a society can be formed with a stable, unified, and enduring social order as well as humaneness among people in the society.3 Nowadays Confucian values have become transcendent ideals of perfection and philanthropy in pursuing moral and spiritual fulfillments.4 Although not mutually exclusive to Confucianism, Taoism offers some

2

A brief review on the traditional religions of Taiwan can be seen in the Cultural Taiwan, Government Information Office of Taiwan, www.roc-taiwan.org.za/taiwan/5-gp/culture/, and www.gio.gov.tw/taiwan-website/5-gp/brief/info04_19.html. 3 The founder of Confucianism is Confucius, Master Kong (551-479 B.C.), during the Chou dynasty. 4 An excellent brief introduction of Confucianism and Taoism can be seen in Berling (1982).

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alternative approaches to the way of life.5 Taoism considers Tao (way or path) as the ultimate origin of all creation and the force that lies behind the functions and changes of the nature world. The order and harmony of nature is more stable and enduring than any states or institutions constructed by humans, and human life can only flourish in accordance with Tao, the power of nature. The tenets of Taoism are based on the worship of heaven and carrying out its Tao. Therefore, Taoist ideas emphasize the love of nature, good moral conduct, and the affirmation of life, health, well-being, vitality, longevity, and immortality. Taoist believers worship a huge pantheon of deities and immortals including folk heroes, famous generals, and sages, and have doctrines of rewarding goodness and punishing wrongdoing in one’s afterlife. Buddhist beliefs are based on the law of Karma, which is the belief that good conduct will be rewarded and evil conduct will be punished. The cycle of reincarnation is linked to Karma in that a human may be reincarnated in another existence as a different type of creature according to the good and evil actions he has done in a previous life. This repetitive cycle of birth, life, death, and rebirth is continued until one reaches Nirvana, a state of non-being or voidness. 3. Empirical framework The theoretical background for this study is based on Azzi and Ehrenberg’s (1975) model of analyzing religious behavior. It is assumed that an individual maximizes his intertemporal utility from the consumption of secular commodities (Ct) and expected after-life consumption (q) by allocating his time and monetary resources. The individual’s utility maximizing problem can be described as:

Max U (C1 , C 2 ,....., CT , q)

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Taoist philosophy was formulated by Lao Tzu (the Old Master, 5th century B.C.) in the Tao Te Ching (Classic of the Way and its Power) and later formalized as a religion by Tao-ling Chang during the Eastern Han dynasty (A.D. 25-220).


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Vol. 5 [2005], No. 1, Article 13

s.t. Ct = Ct ( S t , M t ),

t = 1,2,......, T

q = q( A1 , A2 ,...., AT , G1 , G2 ,...., GT ), At + S t + H t = H , t = 1,2,......., T T t =1

Mt (1 + r ) t

1

+

T t =1

PGt (1 + r ) t

1

T

=

t =1

wH t + I , (1 + r ) t 1

(1)

where At and Gt are the religious attendance and religious giving in period t, respectively, St and Ht are the time spent in secular consumption and the hours of work in period t, respectively, P is the price of religious giving, w is the wage rate, Mt is the monetary expenditure spent to produce Ct, r is the discount rate, and H and I are the time endowment and non-labor income in each period, respectively. To solve this utility-maximizing problem, we write the Lagrangian function as: L = U (C1 , C2 ,....., CT , q) + +

wH t + I t 1 t =1 (1 + r ) T

T t

(H

At

Ht )

St

t =1 T

T

Mt t t =1 (1 + r )

1

PGt t t =1 (1 + r )

1

.

According to the first-order conditions, the optimum requires: q / At 1 = , q / At 1 1 + r

( 2)

q / Gt 1 = , q / Gt 1 1 + r

(3)

U Ct U Ct 1

Ct St 1 = , Ct 1 1 + r St 1


( 4)


Ct Mt 1 = . Ct 1 1 + r Mt 1

U Ct U Ct 1

7

(5)

As described in Azzi and Ehrenberg (1975), if the marginal products of an additional unit of religious attendance and giving in periods t and t-1 are the same ( q / At = q / At 1 when At = At 1 , and q / Gt = q / Gt 1 when Gt = Gt 1 ), then equations (2) and (3) indicate that religious attendance and giving should increase with age. However, equation (5) indicates that whether non-religious giving should be increasing, constant, or decreasing in age depends on whether the marginal utility of non-religious giving is constant, increasing, or decreasing over time when equal non-religious contributions are made. Based on this theoretical model by Azzi and Ehrenberg (1975), the empirical model for an individual i in determining his religious giving can be assumed as the following equation: Gi =

1

+

1

Xi +

P+

2 i

Y + i,

3 i

(6)

where Xi is a set of demographic variables including age, gender, educational attainment, and so on, and Yi is the income level for the individual i. 4. Data

The data used in this study is the Survey of Social Development Trends (SSDT), Taiwan Area conducted by the Directorate General of Budget Accounting and Statistics of the Executive Yuan. In 2003 the survey focused on the social participation of people aged 15 years and older in the country. It is by far the largest and most complete survey devoting particular attention to people’s attitudes in social participation, which include participations in communities, social activities, volunteering works, and contributions to non-profit organizations. In this survey, donations are classified by the type of recipient into five different


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Vol. 5 [2005], No. 1, Article 13

categories: charitable, academic, medical, religious, and political contributions.6 The survey collects a nationwide sample of the respondents’ income, money contribution, volunteer work to non-profit organizations, reasons for making donations, as well as demographical information such as age, gender, employment status, and marital status for a total of 36,772 observations. The most distinctive feature of the SSDT data overall is that it categorizes contributions to non-profit organizations by types of recipients. In some previous studies using survey data, the samples usually focus on collecting information on total donations, and the types of recipient organizations are usually not specified in the data. Apparently, one possible reason why there are relatively few studies aimed at investigating these differences is a lack of sufficient categorized data. Without the categorized contributions, it is infeasible to examine the relationships between age and religious and non-religious giving. Therefore, the SSDT data are valuable for investigating the issues concerned in this paper. Table 1 shows the distribution and average amount of donations by reason and category for contributors, as well as the percentage of respondents who make a positive amount of donation by category. Wishing for blessing is the most common reason for making a religious contribution at 55.76%, followed by the reason for making returns to the society at 24.99%. By contrast, the reason of making returns to the society accounts as the highest percentage for charitable, academic, and medical contributions at 57.49%, 49.49%, and 58.82%, respectively. Overall, for charitable, academic, medical, and religious contributions, the two reasons of making returns to the society and wishing for blessing combine to more than 50% of the distribution of reasons, and advocating

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In SSDT the charitable contributions are defined as the contributions to non-profit organizations with purposes of providing social services and public welfare, including social welfare foundations, charitable foundations, human right groups, nature conservation groups, and the United Way, Taiwan, etc. The religious contributions are defined as the contributions to religious groups with goals of advocating religious disciplines, rituals, and beliefs, inspiring the goodness and sincerity in human hearts, and providing assistance to improve human societies such as temples, churches, and religious associations, etc.



Table 1.

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Distribution and average amount of donations by reason and category Distribution of reasons for making donations in Taiwan (%)

Advocating

Making

belief

returns to

Wishing for Influenced by Persuaded by blessing

friends and

the society

fundraising

Others

family

Charitable

9.96

57.49

21.82

7.03

3.29

0.4

Academic

23.98

49.49

3.57

13.78

8.67

0.51

Medical

15.03

58.82

16.34

3.92

5.23

0.65

Religious

11.75

24.99

55.76

4.87

2.17

0.46

Political

62.9

6.45

6.45

12.9

11.29

-

Others

28.89

46.67

4.44

13.33

6.67

-

Average amount of donations by reason in Taiwan (NT$)

Advocating

Making

belief

returns to

Wishing for Influenced by Persuaded by blessing

friends and

the society

fundraising

Others

family

Charitable

9,772

7,177

4,208

4,202

2,467

1,913

Academic

11,669

8,208

3,831

4,683

1,140

5,312

Medical

3,938

5,322

4,681

2,598

5,342

646

Religious

14,926

6,870

4,008

3,871

3,653

11,344

Political

5,506

6,892

6,361

8,567

8,086

-

Others

10,068

7,286

9,888

2,233

1,123

-

The percentage of respondents who make positive amounts of donation by category

Total giving Charitable 27.54 %

13.37 %

Academic

Medical

Religious

Political

1.02 %

0.8 %

16.48 %

0.39 %

Data source: Survey of Social Development Trend in Taiwan, 2003, Directorate General of Budget Accounting and Statistics, The Executive Yuan. Note: The exchange rate between the US dollar and Taiwan dollar is US$1=NT$31.04.


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Vol. 5 [2005], No. 1, Article 13

belief is the most important reason for making a political contribution at 62.9%. For religious contributions, the reason of advocating belief has the highest average amount of NT$14,926 and is followed by NT$6,870 for making returns to the society and NT$4,008 by wishing for blessing. The pattern of the average amount of donations by reason for charitable contributions is very similar with that of religious contribution. For charitable contributions, advocating belief has the highest average amount of contribution at NT$9,772 followed by making returns to the society at NT$7,177, and wishing for blessing at NT$4,208. For political contributions, the reason of being influenced by friends and family has the highest average amount of contribution at NT$8,567, followed by NT$8,086 for being persuaded by fundraising. Generally, the distribution of reasons and the average amount for political contributions are substantially different from those of charitable, academic, medical, and religious contributions. Among all respondents, 27.54% of them made a positive amount of contribution to one or more than one type of non-profit organizations. In each category, 16.48% of the respondents made a positive amount of religious giving, and 13.37% of the respondents contributed to charitable groups, while 1.02%, 0.8%, and 0.39% of the respondents made a positive amount of contribution to academic, medical, and political groups, respectively. Obviously, religious and charitable giving are the common categories of contributions made by people in Taiwan. Since I intend to analyze the impacts of economic and social characteristics including economic level, and marital status on contributions to religious and other non-profit organizations, I restrict attention to those individuals who are 18 years or older, and respondents under age of 18 are excluded from the sample. To examine the relationship between age and religious giving for adult individuals, respondents aged 18 years and older are classified into six different age groups. Table 2 represents the average amounts of giving by different age groups and types of giving with 35,070 observations. For religious giving, the average amount of giving increases steadily and reaches the highest at NT$1,469.3 for the age group of 50-59 years old, and then it declines slightly to NT$1,218.88 for the group of 60 years and older. For charitable, academic, medical, and political http://www.bepress.com/bejeap/topics/vol5/iss1/art13


Table 2.

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Average amount of giving by different age groups and types of giving (NT$)

18-20 yrs. 20-29 yrs. 30-39 yrs.

40-49 yrs.

50-59 yrs.

60 yrs.

Charitable

58.81

204.22

958.18

1320.45

1218.56

532.49

Academic

4.73

5.11

65.31

164.51

148.42

46.85

Medical

1.8

25.36

44.15

69.57

44.04

27.05

Religious

44.06

156.76

692.96

1099.3

1469.3

1218.88

Political

0.17

5.32

15.37

41.67

35.03

32.58

Others

0

4.62

6.32

34.34

61.93

13.84

Non-

66.5

245.63

1090.33

1631.55

1508.98

653.8

109.56

400.39

1782.29

2729.85

2977.28

1871.68

Religious Total Giving Data source: Survey of Social Development Trend in Taiwan, 2003, Directorate General of Budget Accounting and Statistics, The Executive Yuan.

contributions, the average amount of giving also increases with age, but reaches the highest at the group of 40-49 years old, and then it declines after that. The average amounts of giving at different age groups for charitable contributions are much closer to those of religious giving than for other types of contributions. The average amounts of charitable giving for the age groups of 40-49 years old and 50-59 years old are NT$1,320.45 and NT$1,218.56, respectively. Academic, medical, and political contributions all have much lower average amounts of giving than religious and charitable contributions at each age group. The definitions of variables studied in this paper and their descriptive statistics are reported in Table 3 and Table 4. As shown in Table 4, the average amount of religious giving for all respondents of age 18 years and older, including contributors and non-contributors, is NT$888.59, which is slightly lower than the average amount of non-religious giving at NT$986.48. Among all types of non-religious giving, the average amount of charitable giving is the highest with NT$815.66, and this indicates that the most important type of non-religious giving Topics in Economic Analysis & Policy

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Vol. 5 [2005], No. 1, Article 13

Table 3. Definitions of variables Variable

Definition

Gender

If male, gender = 1; if female, gender = 0.

Age

The age of the respondent

Married

Dummy variable of marital status; married = 1, otherwise = 0.

Employed

Dummy variable of employment status; employed = 1, otherwise = 0.

School

The respondent’s years of schooling

Lp

Log of the after-tax price of giving (one minus the marginal tax rate for the respondent’s annual income)

Volunt

Participate in volunteer work = 1, otherwise = 0.

Partici

The frequency of respondent’s religious participation; very often = 3, often = 2, once in a while = 1, no participation = 0.

Partici1

Dummy variable for the frequency of respondent’s religious participation; once in a while = 1, otherwise = 0.

Partici2

Dummy variable for the frequency of respondent’s religious participation; often = 1, otherwise = 0.

Partici3

Dummy variable for the frequency of respondent’s religious participation; very often = 1, otherwise = 0.

Lgiving

Log of the respondent’s (total giving + NT$1) in NT$1,000

Lrelig

Log of the respondent’s (religious giving +NT$1) in NT$1,000

Lnonrelig

Log of the respondent’s (non-religious giving +NT$1) in NT$1,000

Lcharity

Log of the respondent’s (charitable giving + NT$1) in NT$1,000

Lcharelg

Log of the respondent’s (religious and charitable giving +NT$1) in NT$1,000

Lnorelig1

Log of the respondent’s (academic, medical, and political giving +NT$1) in NT$1,000

Lacademic

Log of the respondent’s (academic giving + NT$1) in NT$1,000

Lmedical

Log of the respondent’s (medical giving + NT$1) in NT$1,000

Lpolitical

Log of the respondent’s (political giving + NT$1) in NT$1,000

YD1,YD2,YD3

Dummy variables for the level of annual income: NT$500,000 – NT$750,000, NT$750,000 – NT$1,250,000, and over NT$1,250,000, respectively.

Aged1, Aged2, Aged3,

Dummy variables for the respondent aged 20-29, 30-39, 40-49, 50-59, and 60 and over,

Aged4, Aged5 RG, CG, AG, MG, PG

respectively Dummy variables for the members of religious, charitable, academic, medical, and political groups, respectively.



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Table 4. Descriptive statistics

Variable

Mean

Standard Deviation

Gender

0.503

0.5

Age

44.84

16.83

Married

0.66

0.47

Employed

0.589

0.49

School

10.09

4.87

Annual income

272,830

250,989

Price of giving

0.924

0.034

Volunt

0.149

0.356

Partici

0.122

0.508

Partici1

0.091

0.287

Partici2

0.113

0.316

Partici3

0.059

0.235

Total giving

1874.07

10652.56

Religious giving

888.59

7422.45

Non-religious giving

986.48

6824.33

Religious and charitable giving

1704.25

10123.57

Charitable giving

815.66

6160.01

Academic giving

81.88

1734.15

Medical giving

41.1

970.05

Political giving

25.31

800.65

YD1

0.17

0.376

YD2

0.022

0.146

YD3

0.017

0.128

Aged1

0.18

0.384

Aged2

0.209

0.406

Aged3

0.216

0.412

Aged4

0.144

0.351

Aged5

0.217

0.412

RG

0.089

0.284

CG

0.079

0.269

AG

0.048

0.213

MG

0.009

0.096

PG

0.027

0.163


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Vol. 5 [2005], No. 1, Article 13

is charitable giving. The average amounts of academic, medical, and political giving are NT$81.88, NT$41.1, and NT$25.31, respectively. In Taiwan, the income tax system allows contributions to non-profit organizations to be tax-deductible up to 20% of the taxpayer’s total income, and the deductions are itemized.7 Therefore, for an itemized taxpayer, the after-tax price of giving is decreasing with his marginal tax rate of income. One possible econometric problem in the estimation process is that the after-tax price of a donation itself is partly dependent on the amount of donations. To avoid this problem of endogeneity, I calculate the after-tax price of a donation as the first dollar price by assuming that the taxpayer does not make sufficient enough donations to change his marginal tax rate after the donation.8 Given the nature of the SSDT data used in this study, it is likely that this simplification will not substantially affect the results.9 Moreover, the SSDT dataset does not allow us to distinguish the after-tax prices of donations made to different types of non-profit organizations, and there is no information for identifying the itemized and non-itemized taxpayers in the sample. Another possible problem is related to the usage of Log(giving) as the dependent variable when a respondent’s amount of giving is zero. To avoid taking the log of zero and to utilize the entire sample in the regression, Log(giving+NT$1) is used as the dependent variable. This 7

According to Article 17 of the Personal Income Tax Codes of Taiwan, contributions made to officially-registered educational (academic), cultural, public welfare, and charitable organizations or agencies are deductible. The deduction should not exceed 20% of the gross income; however, contributions made for national defence, for troop cheering, to the government, or for the maintenance and repair of antiquities and historical site buildings under Article 31-1 of the Cultural Assets Preservation Law, are fully deductible. The taxpayer should provide evidence of official registration. Hence, when taxpayers make contributions to different types of non-profit organizations, the tax treatments are the same and the deductions are itemized. 8 According to Taiwan’s tax system, there are five income brackets subject to different marginal tax rates (6% for annual income less than NT$370,000, 13% for annual income between NT$370,000 and NT$990,000, 21% for annual income between NT$990,000 and NT$1,980,000, 30% for annual income between NT$1,980,000 and NT$3,720,000, and 40% for annual income higher than NT$3,720,000). Some U.S. studies overcome this endogeneity problem by using the non-linear maximum likelihood estimation (Reece and Zieschang 1985), the instrumental variables estimation (Feenberg 1987), or the simultaneous equations Tobit estimation (Brown and Lankford 1992; Choe and Jeong 1993). 9 From SSDT data, only 0.95% of the donors made sufficient amounts of contributions of over 20% of their total incomes to differentiate the marginal tax rates between the first dollar and the last dollar of the donations.



15

treatment allows us to easily calculate the price elasticities of giving with the marginal effects of the Log(after-tax price of giving) from the regressions. 5. Empirical results

Total giving, religious giving, and charitable giving Based on the regression model described in equation (6), I first estimate the relationships between age, and total giving, religious giving, charitable giving, and religious plus charitable giving. The first three columns of Table 5 report the results of Tobit regressions for total giving, religious giving, and charitable giving. The coefficients of age groups as well as the demographic variables all appear to be statistically significant. Total giving, religious giving, and charitable giving all increase with age, and the effects of age are stronger on religious giving than on charitable giving. The marginal effects (M.E.) of the age group for 40-49 years (Aged3), 50-59 years (Aged4), and 60+ years (Aged5) on religious giving are 0.249, 0.303, and 0.342, respectively, whereas they are lower on charitable giving with 0.168, 0.192, and 0.186, respectively. Since there are only slight differences among the coefficients and marginal effects of Aged3, Aged4, and Aged5 for charitable giving, the equality tests for these age-group coefficients are taken. The test results indicate that the null hypothesis of equality is rejected for religious giving, but it cannot be rejected for charitable giving. This further confirms a weaker age effect for charitable giving than for religious giving especially for individuals who are 40 years or older. These results suggest that even though religious and charitable giving both increase with age, religious giving increases substantially more. That is, as age increases during the later stage of one’s lifetime, religious giving has a stronger relationship with afterlife consumption than charitable giving. This appears to be consistent with the theoretical argument suggested by the household production model of religion. The effect of income on religious giving is not significant, but income level is positively related to charitable giving for the groups with an annual income of NT$500,000-NT$750,000 (YD1) and NT$750,000-NT$1,250,000 (YD2). There appears a tendency of a positive relationship between income level and charitable Topics in Economic Analysis & Policy

16

Vol. 5 [2005], No. 1, Article 13

Table 5.

Regression results – Total, religious, and charitable giving

Total giving

Religious

Charitable

Religious & char.

Variable

Tobit

M.E.

Tobit

M.E.

Tobit

M.E.

Tobit

M.E.

Constant

-4.8*

-1.109

-5.184*

-0.651

-5.846*

-0.614

-4.629*

-1.022

Gender

-0.376*

-0.087

-0.306*

-0.038

-0.438*

-0.046

-0.39*

-0.09

Married

0.293*

0.068

0.279*

0.035

0.313*

0.033

0.291*

0.064

Employed

0.419*

0.097

0.423*

0.053

0.364*

0.038

0.413*

0.091

School

0.088*

0.02

0.04*

0.005

0.122*

0.013

0.08*

0.018

YD1

0.03

0.007

-0.082

-0.01

0.35*

0.037

0.086

0.019

YD2

0.495*

0.114

0.183

0.023

0.791*

0.083

0.528*

0.116

YD3

0.084

0.019

-0.402

-0.05

0.747

0.079

0.202

0.045

Aged1

0.496*

0.115

0.556*

0.07

0.354*

0.037

0.457*

0.101

Aged2

1.396*

0.323

1.472*

0.185

1.159*

0.122

1.35*

0.298

Aged3

1.93*

0.446

1.982*

0.249

1.601*

0.168

1.857*

0.41

Aged4

2.269*

0.524

2.411*

0.303

1.823*

0.192

2.195*

0.485

Aged5

2.502*

0.578

2.721*

0.342

1.772*

0.186

2.418*

0.534

Lp

-7.65*

-1.768

-5.738*

-0.721

-5.083*

-0.534

-6.548*

-1.445

1.847* L-likelihood -28242.57 N

35070

1.993*

2.087*

1.843*

-18968.39

-16835.94

-27272.84

35070

35070

35070

Standard errors in parentheses. * indicates statistically significant at 5% at least.

indicates that

the null hypothesis of the equality for the coefficients of Aged3, Aged4, and Aged5 cannot be rejected.



17

giving for the individuals in the first three income groups. The coefficient of the price of giving is negatively significant for total giving, religious giving, and charitable giving, but the price effect is stronger for religious giving than for charitable giving. The estimated price elasticity is –1.768 for total giving, –0.721 for religious giving, and –0.534 for charitable giving.10 This indicates that lowering the after-tax price of giving can effectively increase the amounts of total giving, but it has a weaker effect on increasing religious giving or charitable giving separately. Since the after-tax price of giving is calculated with the statutory tax rates, the estimated price elasticities obtained in this study may be different from the price of giving faced by taxpayers. According to the Income Tax Codes of Taiwan, contributions to all types of non-profit organizations are tax-deductible for itemized taxpayers, and only a standard fixed amount of deduction can be applied for non-itemizers. Therefore, to know the actual after-tax price of giving for a taxpayer, it is necessary to have information for distinguishing between itemizers and non-itemizers. Unfortunately, the SSDT dataset used in this study does not contain any information to know the tax calculated for the respondents in the sample, and a meaningful comparison of price elasticity with those from other studies using data of filing tax returns may be appropriate only for total giving in this study.11

10

To calculate the price elasticity of giving, it is necessary to obtain the marginal effect of log(price) in the Tobit regression model. As a censored regression model ( yi* = ' xi + i ,

yi = 0 if yi*

0 , yi = yi* if yi* > 0 , and

i

~ N (0,

2

) ), the marginal effect of xi in a Tobit

model has two components: its effect on the conditional mean of yi* in the positive part of the distribution, and its effect on the probability that the observation will fall in the positive part of the distribution. That is, Pr[ yi > 0] E [ yi | xi ] E[ yi | xi , yi > 0] = Pr[ yi > 0] + E [ y i | x i , y i > 0] . (See details in Greene, xi xi xi 2000) 11 The SSDT dataset does not contain any information about the respondents’ status in filing their tax returns such as whether filing as itemizers or non-itemizers, or other detailed information related to the calculation of taxpayers’ marginal tax rates such as the number of children and dependents, insurance payments, medical expenditures, and so on. Moreover, to compare the estimated price elasticities for different types of contributions and total giving, it is necessary to consider the marginal effects of price obtained through separate Tobit estimations that consist of two components as described in footnote 10. Topics in Economic Analysis & Policy

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Vol. 5 [2005], No. 1, Article 13

With respect to other demographic variables, the estimated results are largely consistent with traditional understandings. While female respondents tend to contribute more money to religious and charitable organizations than male respondents, married respondents make larger amounts of contributions than singles. As expected, employed respondents make larger amounts of contributions than unemployed respondents, and the years of schooling have positive effects on total giving, religious giving, as well as charitable giving. The last column of Table 5 reports the regression result for the amount of religious giving plus charitable giving. Again, the amount of contribution increases with age, while income has a positive effect on the amount of contribution only for the group of YD2, and the effects of other demographic variables on religious and charitable giving are similar to those from religious giving. Comparing the age effects in the second and last columns of Table 5, the marginal effects of age group variables are larger than those for religious giving alone. This implies that adding up religious and charitable giving together in the regression enhances the effect of age on the amount of giving. The after-tax price of giving also has a significantly negative impact on the amount of giving with the estimated price elasticity of –1.445. With the test result rejecting the null hypothesis of equality for the coefficients of the three oldest age groups, the amount of religious and charitable giving appears to have a strong positive relationship with age during the later stage of one’s lifetime. Again, religious and charitable giving is related to after-life consumption as is the prediction of Azzi and Ehrenberg’s model. Academic, medical, and political giving Table 6 reports the regression results for academic, medical, and political giving, and for the contribution to these three types of organization as a whole. The coefficients of the age group variables appear to be positively significant for academic and medical giving, and for these three types of giving as a whole, but not significant for political giving. However, the null hypotheses of equality for the coefficients of Aged3, Aged4, and Aged5 cannot be rejected for all results of regressions in Table 6. Therefore, these results show that academic and medical http://www.bepress.com/bejeap/topics/vol5/iss1/art13


Table 6.

19

Regression results – Academic, medical giving, and political giving

Academic

Medical

Political

Academic, medical, & political

Variable Constant

Tobit

M.E.

Tobit

-15.99* -0.631 -13.11*

Tobit

M.E.

Tobit

M.E.

-0.058

-54.73

-0.034

-12.98*

-0.17

-0.0037

1.01*

0.0006

-0.132

-0.0017

Gender

0.173

Married

0.711* 0.0028

0.054

0.0002

0.128

0.00008

0.265

0.0035

0.0001

0.143

0.0006

0.303

0.0002

0.257

0.0034

School

0.275* 0.0011 0.217*

0.001

0.13*

0.00008

0.228*

0.003

YD1

-0.285 -0.0011 0.046

0.0002

-0.365

-0.0002

-0.183

-0.0024

YD2

0.662

0.0026

0.063

0.0003

-1.786

-0.001

0.225

0.003

YD3

-1.19

-0.0047 -0.242

-0.001

-0.957

-0.0006

-0.89

-0.012

1.51

0.0068

38.31

0.024

0.933

0.012

Employed

0.037

0.0007 -0.83*

M.E.

Aged1

-0.468 -0.0019

Aged2

1.271

0.005

1.981*

0.0089

40.53

0.026

1.904*

0.025

Aged3

2.553*

0.01

2.432*

0.011

41.9

0.027

2.919*

0.038

Aged4

2.291*

0.009

2.553*

0.011

41.87

0.027

2.879*

0.038

Aged5

1.196* 0.0075

2.88*

0.013

42.09

0.027

3.101*

0.041

-0.05

-11.08

-0.007

-13.88*

-0.018

Lp

-15.9* -0.063 -11.13* 3.739*

3.108*

3.818*

3.176*

L-likelihood -1904.8

-1677.7

-908.41

-4071.76

35070

35070

35070

N

35070


indicates that

the null hypothesis of the equality for the coefficients of Aged3, Aged4, and Aged5 cannot be rejected.


20

Vol. 5 [2005], No. 1, Article 13

giving increase with age when people are under 40 years old. However, these positive relationships between age and academic and medical giving do not become stronger as people become older than the age of 40 and when they are in their later stage of lifetime.12 By contrast, there is no significant relationship between age and political giving. As pointed out by economic experts, several different motives drive donors to make contributions (Clotfelter 1985, 1997; Steinberg 1990; Rose-Ackerman 1996). Some are related to the tangible and intangible benefits that accrue to the donors, while others stem from the pleasure of giving, referred to as the “warm glow” motive, from the altruistic concern of donors about the recipients well-beings, or from the purposes of signaling and pursuing prestige (Bergstrom et al. 1986; Steinberg 1987; Andreoni 1990; Glazer and Konrad 1996; Harbaugh 1998). Different from the concept of after-life consumption emphasized by Azzi and Ehrenberg’s model regarding religious giving, these models focus on the benefits of current-life consumption from making contributions. The results from this study appear to be consistent with most of these theoretical predictions. As for other demographic variables, female respondents make larger amounts of medical contributions than male respondents, but male respondents contribute more to political groups than female respondents. While married individuals contribute more to academic organizations than those who are not married, the years of schooling are positively related to academic, medical, and political giving, and income level does not have a significant impact on any of these three types of giving. 12

A reviewer points out that when academic, medical, and political giving increase substantially in the later stage of one’s lifetime, there are other consistent explanations for the results than potential direct and indirect usage of the goods and services provided by the donees for the contributors. As for medical giving, due to their own health experiences, individuals become more sensitive to the medical needs of the community and increase their giving in an effort to build a legacy for the future, and this is also a form of after-life consumption. Similarly, the substantial increases in academic and political giving in the later stage of one’s lifetime may also be caused by the expenditures of after-life consumption with the concerns over their children in building better educational and political institutions. The author agrees with these arguments, but the regression results in this study show weaker age effects during the later stage of one’s lifetime for these three types of contributions. It will be interesting to further explore the relationship between after-life consumption and academic, medical, and political giving in future research. http://www.bepress.com/bejeap/topics/vol5/iss1/art13


21

The after-tax price of giving is negatively correlated with academic and medical giving, but has no significant relationship with political giving. The estimated price elasticities for academic and medical giving are –0.063, and –0.05, respectively. Moreover, as shown in the last column of Table 6, when considering academic, medical, and political giving as a whole, the regression result is mostly consistent with the theoretical prediction. The age effect on these three types of giving as a whole is weaker than on religious or charitable giving. The marginal effects of the age group variables for the three oldest groups, Aged3, Aged4, and Aged5, are 0.038, 0.038, and 0.041, respectively. Comparing the price elasticities of giving, religious plus charitable giving shows much more elasticity at –1.445 than all other giving at –0.018. In other words, religious plus charitable giving is more sensitive to the change in the after-tax price of giving than all other types of giving. Ratios of religious giving and religious plus charitable giving The first two columns of Table 7 report the second-stage results of a two-stage Heckman model with the ratios of religious giving and religious plus charitable giving to total giving as the dependent variables in the second stage. The independent variables included in the first stage, but excluded in the second stage of regression, are those assumed to correlate with the decision of whether or not to make a contribution, but not with the decision of the ratio of contribution. In the regression the variables of whether the respondent provides volunteer work, religious participation, employment status, and membership dummies are all excluded in the second stage. The coefficients of income levels are negatively significant for the ratio of religious giving, but they are positively significant for the ratio of religious plus charitable giving. This suggests that the ratio of religious giving to total giving decreases as the income level increases for all income groups, but the ratio of religious plus charitable giving to total giving is positively associated with income level. Moreover, the ratio of religious giving has no significant relationship with the after-tax price of giving, but an increase in the after-tax price of giving leads to a higher ratio of religious plus charitable giving to total giving. Finally, the estimation results also show that age has no Topics in Economic Analysis & Policy

22

Vol. 5 [2005], No. 1, Article 13

Table 7. Regression results – Heckman, probit, and ordered probit models Ratio of religious giving

Ratio of religious and

Volunteer work

Religious

charitable giving

(volunt)

participation (partici)

Variable

Heckman

Heckman

Probit

Ordered probit

Constant

0.933*

(0.056)

0.978*

(0.146)

-1.69*

(0.093)

-2.48*

(0.14)

Gender

0.006

(0.007)

-0.006*

(0.002)

-0.056*

(0.018)

-0.085*

(0.022)

Married

-0.008

(0.009)

0.002

(0.003)

0.094*

(0.022)

-0.02

(0.026)

Employed

-0.0002

(0.008)

0.008*

(0.003)

0.032

(0.021)

0.15*

(0.026)

School

-0.009*

(0.001)

-0.002*

(0.0003)

0.04*

(0.002)

0.012*

(0.003)

YD1

-0.071*

(0.024)

0.028*

(0.005)

0.064

(0.095)

-0.287*

(0.123)

YD2

-0.094*

(0.028)

0.026*

(0.006)

0.099

(0.106)

-0.343*

(0.14)

YD3

-0.153*

(0.061)

0.063*

(0.013)

0.076

(0.241)

-0.61

(0.325)

Aged1

0.028

(0.05)

0.01

(0.013)

-0.021*

(0.053)

0.166

(0.101)

Aged2

0.002

(0.05)

0.016

(0.013)

0.004

(0.055)

0.54*

(0.101)

Aged3

-0.023

(0.05)

0.004

(0.013)

0.312*

(0.055)

0.782*

(0.101)

Aged4

-0.021

(0.05)

0.02

(0.013)

0.452*

(0.057)

0.896*

(0.102)

Aged5

-0.019

(0.05)

0.013

(0.013)

0.32*

(0.057)

0.955*

(0.102)

Lp

-0.201

(0.293)

0.45*

(0.056)

0.206

(1.181)

-2.092

(1.533)

0.24*

(0.004)

0.101*

(0.0007)

0.148*

(0.034)

0.318*

(0.019)

Mu(1)

0.203*

(0.007)

Mu(2)

0.615*

(0.015)

L-likelihood

-13910.5

-8930.91

-14334.15

-10417.95

N

35070

35070

35070

35070




23

significant effect on the ratio of religious giving or the ratio of religious plus charitable giving. These results are largely consistent with traditional understanding. Volunteer work and religious participation With the information about whether a respondent provides volunteer work and the frequency of a respondent’s religious participation in the SSDT data, it is possible to examine the impacts of age on providing volunteer work and religious participation. The dependent variable is a dummy variable for the regression of volunteer work with a probit model, and the dependent variable (Partici) for religious participation is coded as 3, 2, 1, and 0 from the highest to the lowest level of frequency with an ordered probit model. As reported in the last two columns of Table 7, the effects of age and other demographic variables on the probability of providing volunteer works and on the frequency of religious participation are examined, respectively. Individuals aged 20-29 years old are less likely to provide volunteer work than respondents who are under 20 years old, but individuals in the three oldest age groups, after the age of 40, are more likely to provide volunteer work than those who are under the age of 20. As expected, during the later stage of their lifetime, people are more willing to provide volunteer work. While female individuals are more likely to provide volunteer work than male individuals, being married and years of schooling also increase the probability of being a volunteer. However, income level has no significant effect on the probability of providing volunteer work. As for the frequency of religious participation, the coefficients of all age groups dummies are found to be positively significant except for the Aged1 group (20-29 years old). This result is consistent with the concept of after-life consumption, which implies increases in religious participation during the later stage of one’s lifetime. Religious participation is negatively associated with income level for individuals with annual income under NT$750,000. By contrast, female individuals show more religious participation than male individuals, and being employed and years of schooling also have positive impacts on the frequency of religious participation. Topics in Economic Analysis & Policy

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Vol. 5 [2005], No. 1, Article 13

The relationship between religious plus charitable giving and all other giving To further investigate whether there is a substitutive or complementary relationship between religious plus charitable giving and all other giving, a Tobit estimation with simultaneous equations is undertaken. This empirical approach is used to overcome the potential endogeneity of explanatory variables in the regression. Since religious giving and charitable giving both have stronger age effects than other types of giving as with the results presented in previous parts of this study, we simply classify all contributions into two categories. The first category of contributions consists of religious and charitable giving, and the second category of contributions includes academic, medical, and political giving. That is, the first category is more related to after-life consumption, while the second category is more a concern over current-life consumption. Therefore, the dependent variables in the Tobit regression of simultaneous equations are Log(religious+charitable giving+NT$1), denoted as Lcharelg, and Log(all other giving+NT$1), denoted as Lnorelig1. The differences in the independent variables used in the first equation (Lcharelg) and the second equation (Lnorelig1) include the dummies for volunteer work, religious participation, and membership in academic, medical, and political organizations. Under this identification strategy, it is assumed that whether having a membership in an academic, medical, or political organization only influences the contributions to these organizations, but not the contributions to religious or charitable groups. In addition, the amount of academic, medical, and political giving is considered to have no influence on the frequency of religious participation, but religious giving and participation are interdependent. Table 8 presents the Tobit estimation result of the simultaneous equations model. Mostly similar to the results from the single equation model shown in Table 5, religious and charitable giving are positively associated with age. While female individuals contribute more to religious and charitable organizations than male individuals, being married, employed, and having longer years of schooling all have positive impacts on the amount of religious and charitable giving. Members of religious and charitable groups make larger amounts of religious and http://www.bepress.com/bejeap/topics/vol5/iss1/art13


25

Table 8. Regression results – simultaneous equations model Religious and charitable giving Variable

Coefficient

S.E.

Academic, medical, and political giving M.E.

Coefficient

S.E.

Constant

6.02*

(0.483)

1.269

-7.284*

(0.066)

Gender

-0.307*

(0.033)

-0.065

-0.032*

(0.014)

Married

0.235*

(0.041)

0.05

0.02

(0.019)

Employed

0.307*

(0.041)

0.065

0.027

(0.019)

School

0.025*

(0.004)

0.005

0.02*

(0.002)

YD1

-0.048

(0.108)

-0.01

0.156*

(0.017)

YD2

0.045

(0.129)

0.009

0.389*

(0.026)

YD3

-0.549*

(0.272)

-0.116

0.667*

(0.026)

Aged1

0.522*

(0.153)

0.11

0.077

(0.063)

Aged2

1.167*

(0.152)

0.246

0.157*

(0.063)

Aged3

1.28*

(0.154)

0.27

0.271*

(0.063)

Aged4

1.582*

(0.155)

0.333

0.214*

(0.064)

Aged5

1.719*

(0.155)

0.362

0.279*

(0.064)

Lp

-4.799*

(1.284)

-1.011

Volunt

0.311*

(0.013)

Partici1

0.106*

(0.019)

Partici2

0.201*

(0.017)

Partici3

0.398*

(0.021)

RG

1.232*

(0.046)

0.26

-0.153*

(0.018)

CG

0.732*

(0.047)

0.154

-0.037*

(0.017)

AG

0.293*

(0.016)

MG

0.423*

(0.025)

PG

0.243*

(0.019)

Lnorelg1

1.421*

L-likelihood

-24138.2

N

35070

(0.063)

0.299



26

Vol. 5 [2005], No. 1, Article 13

charitable giving than those who do not join any of religious or charitable groups. People in the highest income group make a smaller contribution to religious and charitable organizations than those in the lowest income group, and the after-tax price of giving is negatively correlated with religious and charitable giving, having an estimated price elasticity of –1.011. More importantly, the coefficient of academic, medical, and political giving is positively significant. This suggests that religious and charitable giving have a complementary relationship with the contributions to academic, medical, and political organizations. 6. Conclusion

While a growing body of empirical literature on religious behavior with data from Western countries has emerged in recent years, little economic research has been done in this area with data from countries dominated by Eastern religions. Most people in Western countries are adhering to Christianity, but Confucianism, Taoism, and Buddhism are most prevalent in Eastern countries such as Taiwan. Although Western Christianity and Eastern religions share some important concepts about after-life, there has been lack of sufficient empirical evidence to support that religious giving also influences after-life consumption for a society with most people affiliated with Eastern religions. Given the difference in religious affiliations, this study attempts to fill this gap by examining the relationships between age and religious giving and non-religious giving for the people in Taiwan. The findings from this study provide a valuable comparison with those from Western countries dominated by Christianity. With the data of categorized contributions, the effects of age, income, and other important demographic variables on religious, charitable, academic, medical, and political contributions are estimated separately. The findings of this study can be summarized as follows. First, age has stronger effects on religious and charitable giving than academic, medical, and political giving. While income level has no significant effect on religious giving, income has a positive impact on charitable giving for those people who are not in the highest income groups. Second, female, married, and http://www.bepress.com/bejeap/topics/vol5/iss1/art13


27

employed individuals contribute more to religious and charitable organizations, and the after-tax price of giving is negatively associated with religious, charitable, academic, and medical giving. Third, while religious and charitable giving are complementary to contributions to academic, medical, and political organizations, the probability of providing volunteer work and the frequency of religious participation are positively associated with age in the later stage of one’s lifetime. Fourth, the ratio of religious giving to total giving decreases with income, but this ratio has no significant relationship with age. However, the ratio of religious plus charitable giving to total giving increases with income level. The findings from this study suggest that religious giving as well as contributions to charitable organizations both influence afterlife consumption, but political giving has no significant relationship with afterlife consumption. The frequency of religious participation increases strongly with age, and it is consistent with the theoretical prediction suggesting that afterlife consumption comes from the devotion of religiosity by making religious giving and participating in religious activities during one’s lifetime. The effect of the price of giving on the level of contribution is negatively significant for total giving, and for religious, charitable, academic, and medical giving, while providing tax deduction can increase the amount of giving.


28

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