Whether and How Much to Give: Uncovering the Contrasting Determinants of the Decisions of Whether and How Much to Give to Charity with Two-Stage Alternatives to the Prevailing Tobit Model

Charitable giving involves two seemingly distinct decisions: whether to give and how much to give. However, many researchers methodologically assume that these decisions are one and the same. The present study supports the argument that this is an incorrect assumption that is likely to generate misleading conclusions, in part, since the second decision is much more financial in nature than the first. The argument that charitable giving entails two distinct decisions is validated by empirically dismissing the prevailing Tobit model, which assumes a single decision, in favor of less restrictive two-stage approaches: Cragg’s model and the Heckman model. Most importantly, it is shown that only by adopting a two-stage approach may it be uncovered that common determinants of charitable giving such as income and gender affect the two decisions at hand very differently. Data comes from a high-quality 2012 Danish survey and administrative registers.