Nonprofit and Voluntary Sector Quarterly

 

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This version was published on June 1, 2008
Nonprofit and Voluntary Sector Quarterly, Vol. 37, No. 2, 264-280 (2008)
DOI: 10.1177/0899764007310416

Income Volatility and Wealth: The Effect on Charitable Giving

Patricia Hughes

St. Cloud State University

William Luksetich

St. Cloud State University

Charitable giving in the United States provides a major source of funding for nonprofit organizations, but it is also a highly variable source of funding. A possible explanation for the substantial variability in giving lies in the measurement of income. In addition to permanent and transitory income, this article introduces the variability of income as a factor affecting charitable donations. The variability of income increases with the level of household income and varies by the source of income. In distinguishing types of income the authors are also able to shed some light on decision making by married couples. The effect of changes in permanent household income on charitable giving is significantly larger than that of transitory household income. Greater variability in the flow of annual household income has a negative effect on total giving. In addition, the authors find some significant differences in the impact on giving between the husband's and wife's earnings.

Key Words: income volatility • charitable giving • permanent income • transitory income


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