The Signaling Role of Charitable Contributions by Businesses: A Tax Policy Perspective

Tomer Blumkin, Yoram Margalioth, Efraim Sadka, Adi Sharoni

Research output: Contribution to journalArticlepeer-review

Abstract

Empirical evidence suggests that charitable contributions to public goods by businesses may be driven not only by the familiar warm glow of giving motive but also as a means for businesses to signal high product quality. Building on this finding, we present an analytical framework that demonstrates that the optimal degree of subsidization should decrease with the extent to which the signal is informative and may even turn into a tax when the signal is sufficiently strong.

Original languageEnglish
Pages (from-to)87-115
Number of pages29
JournalAmerican Law and Economics Review
Volume24
Issue number1
DOIs
StatePublished - 2022

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