# Inequality as determinant of donation: A theoretical modeling and empirical analysis of Korea

## 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.

## Key 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 introduces a groundbreaking approach to financial donations. Our novel model factors in consumption levels of both the donor and recipient, along with the broader societal context, using utility maximization to unravel the intertwined decisions of consumption, donation, and savings. Real-world data validates our model, confirming known donation factors and revealing a key finding: larger disparities in consumption lead to increased giving, suggesting an altruistic drive where helping others boosts personal satisfaction.