An analysis of altruistic and selfish motivations underlying hometown tax donations in Japan

This study analyzes the altruistic and selfish motivations that underlie the payment made toward Japan’s Hometown Tax Donation system by the citizens, whereby they can pay the tax to municipalities other than the ones in which they reside and receive reciprocal gifts. Using the local government level panel data for 2008–2015, we find that the Great East Japan Earthquake led to an increase in payments through the system to municipalities in which disaster victims lived, thus reflecting an altruistic motive among the citizens. However, a 1% increase in expenditure toward gifts for donors led to only a 0.61% increase in payments, thus suggesting a selfish motive. Gifting thus dramatically reduces altruistic payments.