College Crowd-in: How Private Donations Positively Affect Alumni Giving

Abstract

The issue of donor behavior and\rcrowding out has been pertinent in the\reconomics literature, both theoretically\rand empirically. Aggregate research\rhas not been decisive, nor have many\rstudies analyzed education institutions.\rI begin with a theoretical model of\rcrowding-out versus crowding-in\rdonor behavior. I then employ a fi xed\reffects econometric model to three\rsamples — total universities, public\runiversities, and private universities. By\rimplementing a longer time period and\rlarger sample than previously seen in\rthe literature, I can examine the\rcrowd-out versus crowd-in effect of\rnonalumni private donations on\ralumni donations in the 12-year period\rfrom 1995 to 2006. The results\rdemonstrate a statistically signifi cant\rcrowding-in effect — the charitable\rbehavior of parents, corporations, and\rfoundations positively infl uences\ralumni donating behavior. The reason\rmay be that these nonalumni private\rdonations serve as a signal of