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Oxford Economic Papers Advance Access originally published online on July 30, 2007
Oxford Economic Papers 2007 59(4):561-582; doi:10.1093/oep/gpm026
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© Oxford University Press 2007 All rights reserved

Tough love or unconditional charity?

Spiros Bougheas*, Indraneel Dasgupta{dagger}, and Oliver Morrissey*

*University of Nottingham
{dagger}School of Economics, University of Nottingham, Nottingham NG7 2RD; e-mail: indraneel.dasgupta{at}nottingham.ac.uk


  Abstract

Charitable giving increasingly requires recipients to undertake costly prior action. A common justification is that willingness to undertake costly actions signals greater productivity from transfers. We demonstrate that, if the distribution of recipient types is unknown, recipient costs indivisible and productivity unobservable, conditional charity, once instituted, may not yield information adequate to refute its efficiency claim. Consequently, donors who inefficiently provide conditional charity will not correct themselves. Donors who wrongly provide unconditional charity may however subsequently correct themselves. This offers grounds for scepticism regarding efficiency claims for conditional charity. We also provide reasons for encouraging donor competition and indicator targeting.

Key Words: JEL classifications: F35 • F34 • I38 • O20


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