Revenue interactions: crowding out, crowding in, or neither?

This chapter reviews the literature on revenue interactions, in particular whether government funding ‘crowds in’ or ‘crowds out’ private donations. At an economy-wide level, we conclude that total giving in the US is independent of the growth in other revenue forms. At the ‘cause’ level, the results are mixed. While standard theoretical models predict full crowd-out of private donations by government funding, modifying key assumptions of the model leads to support for incomplete crowd-out and even crowd-in in certain cases. Finally, at the organization level the picture is mixed. Most of the 54 empirical studies reviewed find very little crowd-in or crowd-out. Recent innovations in methodology and expanding studies to countries outside the US have the potential to improve our understanding of nonprofit revenue interactions.