00:00:00
Pinar Yildirim: But we did look at
donations to other organizations
00:00:03
as well. So let me tell you what
we did, and then we can jump
00:00:06
into the conclusion. So the
first thing we wanted to do, of
00:00:09
course, is to understand how the
two types of donations move
00:00:12
relative to each other. So we
wanted to be able to, of course—
00:00:16
in an ideal scenario, you would
like to be able to randomly just
00:00:19
move donations going into one
cause,
00:00:22
and then see the impact on
the other.
00:00:24
- Welcome to <i>The Ripple Effect</i>,
the podcast that takes you on a
00:00:27
journey through the minds of
Wharton faculty. I'm your host,
00:00:30
Dan Loney, and in each episode,
we'll be diving deep into the
00:00:33
inspiration behind the
groundbreaking research that
00:00:37
Wharton professors have
conducted and exploring how
00:00:40
their findings resonate with the
world today.
00:00:43
- Well, certainly the
fall of 2024
00:00:46
will be remembered
as a unique time in and around
00:00:49
the area of charitable and
political giving. Certainly we
00:00:51
are seeing a high level of
political giving right now with
00:00:54
it being a presidential election
year, but you also now have the
00:00:58
impact of Hurricane Helene,
which will also lead to giving
00:01:02
to various organizations looking
to help out those impacted by
00:01:05
the storm. But the question
which has been asked in the
00:01:09
past, and that was being asked
again, is, does one impact the
00:01:13
other? Pleasure to be joined
here in studio by Pinar Yildirim,
00:01:17
who is an Associate Professor of
Marketing here at the Wharton
00:01:19
School. She's been part of
research looking at the
00:01:22
correlation between these two
types of giving. Great to see
00:01:25
you again. How are you?
00:01:26
I'm wonderful. Thank you for
having me.
00:01:28
So the research that you did shows
that there is an impact. Take us
00:01:32
through what you did and what
you found out.
00:01:35
Well, we see significant amounts
of money go into political
00:01:38
donations. And naturally, we ask
this question. Why are we seeing
00:01:43
so much money going into
politics? What motivates people
00:01:46
to give to politics? And can we
explain that in any way, maybe
00:01:50
in relationship to charitable
giving, which we know a lot more
00:01:54
about? And those are the type of
questions that we wanted to
00:01:57
answer. It's an important year.
When we look at the numbers, we
00:02:00
see these numbers going up
compared to the previous years.
00:02:04
For example, if you were to just
look at the 2016 election year,
00:02:08
the presidential candidates were
collectively able to collect
00:02:12
about $440 million in the first
12 months of the campaign. That
00:02:17
number more than doubled in the
2020 election,
00:02:21
going over $1.1 billion.
00:02:23
So in general, we are
seeing this trend. This is for
00:02:27
political giving. We also see
similar trends if you look at
00:02:30
charitable donations. In— last
year, 2023, there were about
00:02:34
$550 billion
00:02:37
going into charitable giving.
And that
00:02:39
number is a significant hike
compared to what we used to see
00:02:43
ten, 15, years ago. For example, in
2010, we used to see about $300
00:02:48
billion going into charitable
giving. So we asked this
00:02:53
question again. What motivates
people to donate?
00:02:56
So we wanted
00:02:58
to understand again, the
motivations to giving. At the
00:03:01
same time, also, wanted to
understand, if we start seeing
00:03:05
potentially an increase in one
type of giving, what might be
00:03:08
the impact on the other form of
giving as well?
00:03:11
So that's what
we wanted to study.
00:03:13
And so then what did you find out
in— and part of the research you
00:03:17
looked at was focused on
00:03:20
giving to the American
Red Cross, correct?
00:03:22
Yes. Our focus, or at least our primary
data
00:03:25
was coming from the
American Red Cross.
00:03:28
But we did
look at donations to other
00:03:30
organizations as well. So let me
tell you what we did, and then
00:03:34
we can jump into the conclusion.
So the first thing we wanted to
00:03:37
do, of course, is to understand
how the two types of donations
00:03:40
move relative to each other. So
we wanted to be able to, of
00:03:44
course— in an ideal scenario,
you would like to be able to
00:03:46
randomly, just move donations
going into one cause and then
00:03:50
see the impact on the other. But
in real world, of course, being
00:03:53
able to see these effects in
random ways is almost
00:03:56
impossible. So we looked at
events that happen in the world
00:04:00
that almost randomly or random-
like fashion, increase the
00:04:05
motivations to give to one type
of cause. And then we can look
00:04:09
at the effects on the other. So
for natural disasters, right? If
00:04:13
you think about it, these events
typically happen in very
00:04:17
unexpected ways. They happen and
their devastation is usually not
00:04:21
calculable in advance,
especially foreign disasters
00:04:25
that take place in far away
lands. They can act as reminders
00:04:29
to give to charity, or how
important donations to
00:04:32
charitable organizations might
be at the time of giving. These
00:04:36
events get plenty of, or ample
amounts of coverage on media,
00:04:39
and therefore could increase the
motivations they give in giving
00:04:43
to charity, at least in
temporary ways. So we took
00:04:47
advantage of foreign natural
disasters, large disasters, and
00:04:51
we looked at the increase in the
American Red Cross donations
00:04:54
around the time of or in the
weeks that follow these natural
00:04:57
events. And then at the same
time, looking at the Federal
00:05:00
Elections Commission data on
politics— on political
00:05:03
donations, we looked at the
response in political giving as
00:05:07
well. So what we have seen was
in the weeks— the six
00:05:11
weeks, roughly, that follow a
large foreign natural disaster,
00:05:16
you see about a 34 to 35%
increase in the American Red
00:05:20
Cross donations, and the
corresponding decline in the
00:05:24
political donations is about 18
to 19%.
00:05:27
- Right.
- So just to summarize
00:05:30
that, again, we see an increase
in charitable giving or
00:05:34
disaster response giving,
00:05:36
and then we see a decline
in the political donations.
00:05:38
Does it happen to go the reverse way
00:05:41
in a situation where you have a
00:05:43
political event going on, and
maybe you don't necessarily have
00:05:47
the natural disaster that occurs?
- Yeah.
00:05:50
So exactly the same way of you
framing that question, we also
00:05:55
wanted to understand the flip
side of the coin. If we start
00:05:58
seeing, for example, events that
motivate giving to politics, do
00:06:02
we see a response in charitable
giving as well? And again,
00:06:06
finding events that will
randomly increase the
00:06:08
motivations to political giving
is somewhat hard, but we can
00:06:12
look at events that impact
individuals or voters in ways
00:06:17
that are almost random. For
example, we can look at
00:06:19
political advertising. We took
advantage of some of the
00:06:23
characteristics or institutional
futures of political giving or
00:06:27
the media markets. In general, in the
United States, if you want to
00:06:31
buy advertising, you typically
buy them, especially TV
00:06:35
advertising, by focusing on
geographic areas that are called
00:06:39
as "designated media market"
areas. Designated market areas,
00:06:43
DMAs, these are areas that are
defined by the company Nielsen.
00:06:48
And the boundaries of these
markets are typically
00:06:50
independent of the
administrative boundaries. So
00:06:53
what that means is you could be
living— or two individuals could
00:06:57
be living on two opposite sides
of a designated market area
00:07:03
boundary, and they could receive
very different amounts and very
00:07:07
different types of political
ads. And we take advantage of
00:07:10
those boundaries. We simply do a
comparison of the individuals
00:07:14
who fall— again, somewhat
randomly— who fall on two sides
00:07:18
of that boundary, and compare
how someone who might have been
00:07:22
exposed to higher levels of
political advertising might be
00:07:26
increasing or changing their
giving to politics, and at the
00:07:30
same time, how that person
responds in charitable giving.
00:07:34
And what we see is— just to
quantify that— about a 10%
00:07:38
increase in the political ad
spending. So political ad
00:07:42
spending typically determines
what you can buy in, essentially,
00:07:45
a market area. A 10% increase
roughly corresponds to about a
00:07:50
0.2% increase in giving to
politics, and at the same time,
00:07:56
a 0.4% decline in giving to
charity. So the amounts look
00:08:03
slightly maybe different in
terms of the magnitudes. But if
00:08:06
you actually do a calculation, a
comparison of how charitable
00:08:10
giving responds to increase in
political events, and do the
00:08:14
opposite— how political giving
responds to to these charitable
00:08:19
or disaster events— we see
somewhat comparable responses.
00:08:23
Do people— you mentioned the
historical numbers in terms of
00:08:26
total giving. Do people feel
like their money has more of an
00:08:33
impact now than maybe they did
20, 30 years ago? Or is it, you
00:08:37
know, just kind of the natural
course of— of the funds that
00:08:42
we have available to us, that
we're willing to give to either
00:08:44
case? Whether it be political,
whether it be a charitable
00:08:48
donation as well.
- Yes.
00:08:50
- Do people feel like
there— it has more of
00:08:52
an impact these days?
00:08:53
Yeah. So if we reframe your
question, I think we should ask
00:08:57
what might be the motivation to
giving, or what might be
00:09:00
explaining, potentially, the
substitution that we observe.
00:09:03
And one sort of simple explanation
could be that people have
00:09:07
limited budget. And as they
start giving to one cause, they
00:09:10
start decreasing the amount for
another cause. That, of course,
00:09:15
is an explanation that we cannot
rule out for everyone, right?
00:09:18
There could be some individuals
who, indeed, just because of
00:09:20
budgetary considerations, start
giving to one cause and
00:09:24
start taking away from the other
one. But we did look at spending
00:09:27
or the response in other items.
For example, we looked at how
00:09:33
retail spending, or spending on
on groceries, or spending on
00:09:38
lottery items, lottery tickets,
etc, which tend to be a lot
00:09:42
more, you know, hedonic type of
spending— we looked at how
00:09:47
people's other spending response
to the— both the political
00:09:52
giving, as well as the charitable
giving. So while we cannot rule
00:09:55
out, of course, individuals
giving because of budgetary
00:09:58
considerations, one thing we
have done is we looked at also
00:10:03
spending in other categories.
For example, we looked at retail
00:10:06
spending. We looked at grocery
spending, we looked at buying
00:10:10
lottery tickets— which, of
course, is not something that
00:10:13
you have to do, right? It's
something that you can— you can
00:10:17
decide to buy. We did not see
the same response. When we look
00:10:21
at, for example, the increase in
charitable giving, you do not
00:10:26
see a decline in the spending
items of these sorts. So we
00:10:31
therefore think that it should
not— or the substitution that
00:10:34
you observe— should not be solely
explainable by the budget
00:10:38
considerations. But there could
be other motivations that are
00:10:41
potentially driving the pattern
that we observe. Now, one
00:10:46
potential explanation is
something that relates to
00:10:49
charitable giving. When you look
at motivations for charitable
00:10:52
giving, typically, the
literature will put those
00:10:55
motivations in two very broad
buckets. One is the idea that,
00:11:00
"I'm very altruistic. I really
want the betterment of others. I
00:11:03
care about the welfare of
welfare of others, and therefore
00:11:05
I give, right? I give because I
want you to be better." - Right.
00:11:09
- The other set of motivations
typically fall under impure—
00:11:13
impure altruism, or what the
economists and the academics
00:11:17
like to call "warm glow". "I give
because it makes me feel good."
00:11:21
- Sure. - "I give because I get some
kind of status out of giving.
00:11:26
Maybe I'm recognized as a donor
somewhere, or I feel good about
00:11:31
myself because I do something
good for others." So for the
00:11:34
individuals who are giving
primarily because of the impure
00:11:38
altruism or "warm glow"
motivations, you don't really
00:11:41
care if, ultimately, the money
that you're giving is helping
00:11:45
others to recover from a
disaster, or doing something. So
00:11:49
if the motivations for giving to
the two types of charities, or
00:11:54
if the primary motivations of
giving is "warm glow" or feeling
00:11:59
better about yourself, you could
feel better about yourself from
00:12:03
giving to to charity, and you
might get a similar enjoyment,
00:12:07
similar utility, out of giving to
politics as well. So if
00:12:11
motivations are "warm glow", we
could potentially explain why
00:12:15
people give to one cause
versus the other.
00:12:18
So the political cycle is unique in
this process, because obviously
00:12:22
it's not just the day or the
week before the election. It's
00:12:26
obviously a long run-up process
in order to get to that point.
00:12:30
And as you mentioned before,
there's a lot of political
00:12:32
advertising that will be on
different platforms. That, I would
00:12:37
assume, has then an impact, kind
of in a longer framework, on how
00:12:43
people think about their giving
at that particular time. Whether
00:12:46
they're giving to a political
campaign versus a charitable
00:12:49
giving. And I'm wondering if it
has a longer impact, potentially
00:12:53
to the detriment of the
charitable organization, that
00:12:57
they lose out on funds from
individuals over a longer period
00:13:01
of time, because that election
cycle is such a longer cycle.
00:13:04
Yeah. So I hear, I think, three
sort of separate questions in
00:13:09
what you just asked. One is, of
course, the idea of, is there
00:13:13
any difference across the time
period? For instance, going into
00:13:17
getting closer to the elections,
do we see a different level of
00:13:20
impact? Because of the
aggregation in our study of the
00:13:24
time periods, we wanted to look
at donation response over a
00:13:28
number of weeks. We don't
necessarily observe— we were not
00:13:32
able to observe these type of
differences. But certainly, I
00:13:35
could speculate that if somehow
we are sending more reminders
00:13:40
about the importance of donating
to politics to individuals, or
00:13:44
if we are elongating the periods
over which people are constantly
00:13:48
reminded of the need to give to
politics, that could have a
00:13:52
negative impact on the
nonprofits that are trying to
00:13:56
raise money for charitable
causes, as well as the victims
00:14:00
of these disasters. Because
they're not going to be able to
00:14:03
receive the same level of funds
00:14:05
that they could have received
otherwise.
00:14:07
What do you think were your most
important takeaways in looking
00:14:10
at these components of giving
from the outside?
00:14:15
So I think a couple of important
takeaways. First, we want to
00:14:19
understand the motivations to
giving to politics. Because, as
00:14:22
I mentioned earlier, this is not
entirely clear. It's relatively
00:14:25
understudied compared to
charitable giving. We understand
00:14:28
the motivations to give to
charitable giving, but we don't
00:14:30
know what political
donations are really for, or if it—
00:14:36
some— some academics, some
researchers, suggest that people
00:14:40
give because they expect
something in return, right? This
00:14:43
is an instrumental motivation.
You're donating because maybe
00:14:47
you think that the politician
will return that favor. - Sure.
00:14:50
In the future.
Or some others
00:14:52
suggested
that people give because they
00:14:54
think it's their civic duty.
Others suggested that people
00:14:57
give because they get some
consumption value out of that.
00:15:00
So there could be different
explanations, of course, or
00:15:03
different suggestions as to why
people give. But it's important
00:15:06
to underline the common elements
with charitable giving. And I
00:15:09
think that's one of the first
things that we do. We see that
00:15:13
these forms of giving are
substitutes. The second, I
00:15:17
think, important takeaway for us
is the relative negative impact
00:15:23
of these two forms of giving on
the other. Right? So we are
00:15:27
observing that if there is an
event that drives charitable
00:15:31
giving, disaster giving in
particular, we will see a
00:15:35
negative impact on political
donations. And that's not just
00:15:38
coming from the budget effect.
That seems to come from other
00:15:42
factors as well, just like the
"warm glow" effects that motivate
00:15:45
people for giving. To quantify
that, we see that if there is an
00:15:49
increase of $1 that goes to
charitable giving, that results
00:15:54
in about a 42 cent decline in
the political donations.
00:15:59
Now looking at the other side,
we also see that political
00:16:02
events that drive political
giving could have a negative
00:16:05
impact on charitable donations.
And that could be potentially a
00:16:09
negative outcome for both
nonprofits as well as disaster
00:16:13
victims. To quantify that
effect, we see that if there is
00:16:16
a $1 increase, or events that
drive political donations result
00:16:21
in a $1 increase in political
giving, that corresponds to about
00:16:25
a 33 cent decline that's going
to their charitable giving. So it's
00:16:30
a sizable amount, and I think we
need to be aware of these
00:16:33
potential responses that come
from the other causes of giving.
00:16:38
And a third thing that we
discuss at the end of our study
00:16:42
which we care about is this
question about the effect of
00:16:45
money in politics. Right? As we
were starting, I mentioned that
00:16:50
the political donations are
increasing. A non-significant— non-
00:16:55
trivial amount of those
donations come from individual
00:16:58
donors, and that seemed to— seems
to have increased over the last
00:17:01
election cycles as well. So the
question comes down to, should
00:17:06
we think about— rethink— about
the policies that restrict
00:17:10
giving to politics? Is this too
much money? And if there's too
00:17:15
much money or too many political
donations, does that really
00:17:19
change the electoral dynamics in
some way. Right? Could it be
00:17:22
potentially benefiting some
politicians more than others?
00:17:26
And in discussing this topic,
typically, we care about a
00:17:30
concept called incumbency
advantage. I think for our
00:17:33
listeners, it might be
potentially a familiar concept,
00:17:36
but in brief, it just simply
describes this idea that
00:17:40
politicians who have access to
resources, who have been in an
00:17:43
office before, who have been
elected before, who essentially
00:17:47
are an incumbent, they tend to
get re-elected again and again
00:17:50
when you look at the United
States elections, as well as in
00:17:54
other countries as well. We
don't like the idea of
00:17:57
incumbency advantage too much
unless the incumbent gets
00:18:00
elected again and again because
they are the better candidate.
00:18:04
We don't like it if it's coming
from some resource advantage,
00:18:06
because that means we have less
competitive elections, and some
00:18:10
of the really good candidates,
potentially high quality
00:18:13
politicians, they may not be
able to to get ground. They may
00:18:17
not be able to get elected, and
they may not eventually be able
00:18:20
to benefit the public with their
policies. So looking at the
00:18:23
question of money, right, small
and large amounts of money that
00:18:28
go into donations, and how that
potentially influences
00:18:31
incumbency advantage, that's
also something that we do in
00:18:34
this study. And here, charitable
donations are really useful, or
00:18:39
disaster events are really
useful because they create an
00:18:43
exogenous or unexpected change
in the money that goes to
00:18:47
politics. Therefore, we can look
at the response in terms of the
00:18:52
electoral chances of incumbents
and challengers. And perhaps
00:18:57
surprisingly, or at least
differently from some of the
00:19:00
earlier studies in the
literature, we find that
00:19:02
actually more money in politics
is not necessarily bad. When we
00:19:07
look at the chances of getting
elected by an incumbent as well
00:19:11
as a challenger, we see that if
we can increase the total pot of
00:19:16
money— that is, if we can have
more donations, more money going
00:19:20
into politics, we actually are
able to increase the chances of
00:19:24
a challenger getting elected. So
about a 10% increase in
00:19:28
donations results in about a 3.6
percentage point, if I recall
00:19:33
correctly, increase in the
chances of a challenger getting
00:19:37
elected. Which, again, if we
believe in more competitive
00:19:40
elections, where everybody has
the chance to go and run and get
00:19:44
elected, which should be a
positive outcome for the society.
00:19:48
Pinar, great to have you with us,
and to go over all of this.
00:19:51
Thank you very much.
00:19:52
Thank you so much for having me.
00:19:53
You got it. Pinar Yildirim,
Associate Professor of Marketing
00:19:56
here at the Wharton School.
00:19:58
Thank you for listening to
00:20:00
<i>The Ripple Effect</i>. We hope you found
this episode informative and
00:20:02
engaging. Don't forget to
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00:20:06
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00:20:09
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