20 Time discounting and charitable giving in times of crisis

Kienle Ann-Katrin1, Nicklisch Andreas1, Ross Johannes2

  1. University of Applied Sciences of the Grisons, Centre for Economic Policy Research, Chur, Switzerland
  2. Universität Hamburg, Faculty of Business, Economics and Social Sciences, Hamburg, Germany

The Coronavirus circumnavigates the globe. It puts entire societies into states of emergency and multiplies the number of people in need exponentially. In the USA, over 1.6 million people are infected and unemployment rate jumped from 4.4 to 14.7 percent in April 2020. Therefore, the question arises how the pandemic affects the size of charitable giving and people’s impatience for giving? Does self- interest due to economic pressure predominate willingness to help in the view of desperate need? What role does efficiency play? Does people’s impatience raise regardless of efficiency?

This study answers those questions by analyzing the decisions of about 600 US participants in an online experiment on individual time discounting and charitable giving in two waves of the pandemic. We ask participants to split money between two options. These options differ in the recipient (yourself or a charity organization supporting medics to fight the pandemic) and the time of the payment (tomorrow or in two weeks). Additionally, we vary discount rates throughout all question types such that later payments are more or less efficient than the current one.

As a preliminary result, we find the following: despite the maturity of the crisis, efficiency is important for participants’ decisions when the distribution takes place between the same recipient. In contrast, participants who are at risk for COVID-19 peak in equal splits, whereas participants with lower health risk choose much more selfish distributions. Additionally, fired participants who have not lost their jobs in the crisis show clear bifocal distributional preferences for the good of fair and selfish distributions. For fired participants, this effect is much weaker.

To conclude, in times of crisis, willingness to donate can be found in risk. Furthermore, economic aspects such as job loss changes the charitable giving.