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Seminars

Brown Bag Seminar2021-15

Finance  Webinar2021-48)

Topic: Hedging by Giving: Spiritual Insurance and Religious Donations

Speaker: Yu ZhangPeking University  

Time: Friday, December 3, 12:00–1:00 PM, Beijing Time

Location: K01, Guanghua Building 2


Abstract

List (2011) put forward a curious observation that charitable giving is “sticky downwards” that they are significantly higher than would be predicted by macroeconomic conditions in economic downturns, which require a deeper behavioral explanation. We provide a case study using detailed micro data on income dynamics and donations that show higher income uncertainty predict more donations, which is consistent with List’s observation but at odds with existing models of donations. This predictive effect of income uncertainty on donations is especially strong for religious donations, and for uncertainty of income drop. Using unique features in the institutional setting and standard tests in the literature, we pinpoint evidence that our results are explained by a wishful thinking” or “spiritual insurance” channel, instead of community insurance. Further, donating to religious organizations crowds out demand for market-based insurance products.


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