Inequality as determinant of donation: A theoretical modeling and empirical analysis of Korea
Sang Hak Sohn, Jong Mun Yoon, Seongmin Jeon
TL;DR
This study explores how financial inequality influences donation decisions, showing that larger consumption gaps lead to more giving due to altruistic motives.
Contribution
The paper introduces a novel model linking consumption, donation, and savings through utility maximization, validated with empirical data.
Findings
Larger consumption gaps between donors and recipients lead to increased donations.
Donation decisions are influenced by altruistic motives that enhance the donor’s own utility.
Abstract
Recipient financial need is a crucial factor in donation decisions. This study proposes a novel model for determining financial donations, incorporating consumption levels of both donor and recipient within a societal context. Solving our model’s utility maximization problem reveals how consumption, donation, and savings are interlinked. Empirical evidence reinforces these findings, aligning with prior research and showing that larger consumption gaps between donors and recipients lead to increased donations. Our findings point towards an inherent altruistic motivation in donation, where elevating the recipient’s well-being ultimately enhances the donor’s own utility. This reinforces the notion that consideration of the recipient’s financial hardship, as reflected by their consumption patterns, is crucial when making donation decisions. Shifting beyond traditional models, this study…
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Taxonomy
TopicsMicrofinance and Financial Inclusion · Diverse Topics in Contemporary Research · Sharing Economy and Platforms