The Impact of Government Funded Initiatives on Charity Revenues

When a charity receives government funding does it undo the benefits of that funding by changing its behavior for the collection of revenues from other sources? Do donors change their behavior? In recent years, the classic question of understanding crowd out from the charity perspective has been studied by numerous authors. This paper explores the extent to which a government funded program for new charity initiatives crowds out revenue from other sources. We explore 11,000 applications by more than 4,500 charities for funding over a 10-year period. We demonstrate that the revenues of the charity increase approximately 16% and that the effect of the grant extends several years. The results suggest a change in charity behavior that potentially may dampen the full effect and/or persistence of the government funding.