Effect of Government Grants on Private Giving to East Asian Nonprofits

For effective financial management, social work managers must clearly grasp the relationship between government grants and private contributions, which is frequently characterized as crowding-out effects. Crowding-out effects have been investigated for various types of nonprofits in the U.S., and the results have been mixed. In spite of its popularity in nonprofit research, the theory has not been applied to nonprofits serving minority communities. This is the first pilot crowding-out study looking at East Asian nonprofit organizations, including Chinese, Korean, and Japanese-American nonprofits in the NY and NJ metropolitan area (n = 410). Through a panel analysis, the current study found a significant crowding-in effect for donations to East Asian-American nonprofits (p < .01). The relationship between government grants and private giving was different for each East Asian-American nonprofit organization. Particularly, donors of Chinese and Japanese-American nonprofit organizations donated more money when their charities received more government grants (p < .05). In contrast, we found crowding-out effects for Korean-American nonprofit organizations, but the result was not significant (p > .05). The estimated crowding-in effects of government grants on private giving by each of the East Asian countries were explicated based on each country’s social, political, and cultural background such as the quality of the charity, transparency, and political trust. Social work managers in ethnic nonprofit organizations should establish different strategies to help shape donor giving patterns according to the effect of government grants.