What drives overhead aversion in charity? Evidence from field-experimental variation in fundraising costs

Abstract

This article explores donors’ aversion to financing charities’ fundraising expenses. We hypothesize that such expenses can signal a charity’s efficiency, or affect the donors’ perception of the impact a donation has on the cause. Using data from a randomized field experiment, we disentangle both effects, differentiating between weakly and strongly committed donors. Among potential donors who are weakly committed to the cause, information on the charity’s efficiency does not affect donation behavior. Signaling an increased impact leaves unaffected the average donation among weakly committed donors, but diminishes their likelihood to give. Regarding strongly committed donors, we find that impact-related information does not affect behavior, but a signal of improved efficiency strongly increases donations along the intensive margin. We conclude that information on fundraising expenses plays little role for weakly committed donors. In contrast, strongly committed donors are averse to financing fundraising expenses mostly due to efficiency concerns.