Do Government Expenditures Crowd Out Corporate Contributions?

The question of whether corporate charitable contributions are crowded out by government expenditures has been virtually neglected in the literature. While governments are engaged in fiscal realignments, it seems timely to ascertain whether the corporate sector will fund any shortfall in services brought about by government spending adjustments. The authors address this issue using a unique microdata set containing 641 observations on corporate giving over the three-year period from 1990 through 1992. Rather than filling the gap left by government spending reductions, their results suggest that corporate contributions could, in fact, contract—that is, government spending and corporate contributions may be complements rather than substitutes.