Crowding In with Impure Altruism: Theory and Evidence from Volunteerism in National Parks | Matthew Kotchen

Matthew will be discussing the paper: Crowding In with Impure Altruism: Theory and Evidence from Volunteerism in National Parks.

Abstract

How does government provision of a public good affect private provision? Understanding the ways in which public provision affects private provision—through either crowding out or crowding in—is requisite for the optimal supply of public goods. Within the literature on privately provided public goods, the extent of crowding out is also used as the standard test between leading models of individual behavior based on pure or impure altruism. We identify limitations of this oft-used specification test based on crowding out, propose a more general alternative based on crowding in, and provide empirical evidence that supports the new test. We take advantage of a unique panel data set on volunteerism in U.S. National Parks to estimate the causal effect of changes in public funding to a park on the amount of within-park volunteerism. The overall finding is that each additional dollar of public expenditure within a park crowds in 27 cents worth of volunteerism on average. We show how our estimates of crowding in, along with heterogeneous effects based on park and volunteer hour types, are theoretically consistent with the mainstay model of impure altruism. We thus argue in favor of shifting emphasis in the literature to recognize that, in general, (i) crowding out need not be less with impure altruism than pure altruism, and (ii) the presence of crowding in provides a more general test for distinguishing between models of privately provided public goods.