Faith? Hope? Charity? Religion explains giving when warm glow and impure altruism do not

Abstract

I explain why many charities, especially religious ones, spend significantly to improve poor community members' living standards. Conventional theoretical philanthropy models with altruism or impure altruism/warm glow cannot explain poverty-alleviating private transfers in the type and size of communities where this occurs—for example, congregations. However, if preferences reflect religious precepts (you are your brothers' keeper; treat neighbours like yourself), charitable poverty alleviation can be optimal even in large communities. Income and price elasticities for giving prove important. Surprisingly, charitable private transfers are less likely when donors care for recipients' living standard instead of the aggregate amount all recipients get.