Disaggregating the Effects of Inequality on Informal Giving: Evidence From Pakistan

In this article, we outline the determinants of informal charitable giving and the link between giving and inequality. Arguing that inequality encompasses at least two competing effects—distrust and observed need for donations—we use a novel proxy to separate out the effect of the latter from the former on household’s magnitude of informal giving. Using data from the Pakistan Centre for Philanthropy’s 2014 Indigenous Individual Philanthropy Survey, we find that informal giving in Pakistan follows patterns like those observed in the literature for formal giving. We also find evidence for a positive relationship between observed need and the magnitude of person-to-person giving. Controlling for observed need, we find that the residual correlation between inequality and giving is negative, one explanation of which may be the positive link between inequality and decreased social cohesion and trust.