Giving with Impure Altruism: Applications to Charity and Ricardian Equivalence Author(s): James Andreoni Source: The Journal of Political Economy, Vol. 97, No. 6 (Dec., 1989), pp. 1447-1458 Published by: The University of Chicago Press Stable URL: http://www.jstor.org/stable/1833247 Accessed: 17/10/2010 21:01 Your use of the JSTOR archive indicates your acceptance of JSTOR's Terms and Conditions of Use, available at http://www.jstor.org/page/info/about/policies/terms.jsp. JSTOR's Terms and Conditions of Use provides, in part, that unless you have obtained prior permission, you may not download an entire issue of a journal or multiple copies of articles, and you may use content in the JSTOR archive only for your personal, non-commercial use. Please contact the publisher regarding any further use of this work. Publisher contact information may be obtained at http://www.jstor.org/action/showPublisher?publisherCode=ucpress. Each copy of any part of a JSTOR transmission must contain the same copyright notice that appears on the screen or printed page of such transmission. JSTOR is a not-for-profit service that helps scholars, researchers, and students discover, use, and build upon a wide range of content in a trusted digital archive. We use information technology and tools to increase productivity and facilitate new forms of scholarship. For more information about JSTOR, please contact support@jstor.org. The University of Chicago Press is collaborating with JSTOR to digitize, preserve and extend access to The Journal of Political Economy. http://www.jstor.org

Giving with Impure Altruism: Applications to Charity and Ricardian Equivalence James Andreoni University of Wisconsin-Madison Models of giving have often been based on altruism. Examples in- clude charity and intergenerational transfers. The literatures on both subjects have centered around neutrality hypotheses: charity is subject to complete crowding out, while intergenerational transfers are subject to Ricardian equivalence. This paper formally develops a model of giving in which altruism is not "pure." In particular, people are assumed to get a "warm glow" from giving. Contrary to the previous literature, this model generates identifiable comparative statics results that show that crowding out of charity is incomplete and that government debt will have Keynesian effects. I. Introduction The literatures on charitable giving and on Ricardian equivalence both center around a neutrality hypothesis. In the charity literature, government donations to a charity, financed by lump-sum taxes, will crowd out private giving dollar for dollar (Warr 1982 Roberts 1984). In the Ricardian equivalence literature, the consumption of parents and heirs is independent of the distribution of income among them (Barro 1974). A similar result is found in Becker's (1974) Rotten Kid theorem. While these neutrality results are discussed separately in the literature, their theoretical foundations are really the same. All con- cern public goods: in models of charity, the charity is assumed to be a I owe thanks to Theodore Bergstrom, Lawrence Blume, Russell Roberts, Richard Steinberg, Hal Varian, James M. Walker, the editors, and some referees for helpful comments. This work was partially supported by National Science Foundation grant SES-882 1204. [Journal of Political Economy, 1989, vol. 97, no. 61 ? 1989 by The University of Chicago. All rights reserved. 0022-3808/89/9706-00(1$01.50 1447