Crowding Out of Private Contributions by Government Funding: The Importance of Charitable Activities and Population Served

Abstract

Existing literature on crowding out typically focuses on donations to any charity or to those providing services in specific areas, like arts or social services. We depart from this literature by focusing on all charities that serve a specific geographic/cultural population, namely Indigenous peoples. This specific population is of interest for several reasons. Firstly, charities that serve Indigenous people are much more likely to receive government funding relative to all other charities: 57% versus 35%. We wonder if government funding helps explain the large difference in average donations to Indigenous-serving as compared to non-Indigenous serving charities. Secondly, we know very little about the role of the charitable sector in serving the Indigenous population even though it is amongst the most vulnerable in Canada. We uncover several useful findings: government funding always crowds out Indigenous-serving charities; the crowding-out of Indigenous-serving charities is usually larger but never smaller than that of non-Indigenous serving ones; and the crowding-out of Indigenous-serving charities is invariant to whether the charity is located on or off reserve.