Matching donations without crowding out?

By Maja Adena

Matched fundraising, in which a large donor tops up individual donations according to some scheme, is popular among charitable organizations. Recent studies based on lab or field experiments (see, for example, Huck and Rasul, 2011) demonstrate, however, that matched fundraising has a downside: it generates substantial crowding out and appears inferior to solicitation schemes that simply announce a lead gift (Huck et al., 2015).

Is there a way of matching donations that avoids crowding out? In a recent article, BCCP fellows Maja Adena and Steffen Huck introduce a novel matching method where the matched amount is allocated to a different project. They also present some simple theoretical considerations that predict reduced crowding out or crowding in (depending on the degree of substitutability between the two projects) and present evidence from a large-scale natural field experiment and a laboratory experiment. Similar to findings in the literature, conventional matching for the same project results in partial crowding out in the field experiment and, as predicted, crowding out is reduced under the novel matching scheme. The lab experiment provides more fine-tuned evidence for the change in crowding and yields further support for the theory: the novel matching method works best when the two projects are complements rather than substitutes.

Read the article Matching donations without crowding out? Some theoretical considerations a field, and a lab experiment, Journal of Public Economics, 148 (April), 2017, pp. 32-42.