Posted by Todd Zywicki:
Public Sectoring Crowding Out Private Charity:
http://volokh.com/archives/archive_2005_06_12-2005_06_18.shtml#1118836958
I just came across [1]this paper by Gruber and Hungerman on crowding
out of private sector charity by government spending. (Its an NBER
paper, so not everyone may be able to get it). I always thought that
Putnam's response in Bowling Alone to the "crowding out" effect of
government services displacing civil society institutions was an
especially weak part of his argument (although there are plenty of
other weak points as well).
As David Beito showed in his superb book [2]From Mutual Aid to the
Welfare State, "intermediary"/"civil society" institutions provided
many of the basic social services that the welfare state has
displaced. If Putnam is correct about the decline of social capital (a
questionable proposition itself), part of this may be because of
government crowding out of these social services. Once these groups
stop offering medical and insurance services, then all they are is a
place to drink beer, in which case they are competing with television
and other forms of entertainment. Putnam, I think, fails to appreciate
that the generation of social capital from these groups is a positive
externality of the provision of these private benefits, and that
without the private benefits, the economic structure of the groups
break down. People stay home and watch tv, or go out to restaurants
privately, rather than coming together in these groups.
Here's the abstract from Gruber and Hungerman: Abstract:
Interest in religious organizations as providers of social services
has increased dramatically in recent years. Churches in the U.S.
were a crucial provider of social services through the early part
of the twentieth century, but their role shrank dramatically with
the expansion in government spending under the New Deal. In this
paper, we investigate the extent to which the New Deal crowded out
church charitable spending in the 1930s. We do so using a new
nationwide data set of charitable spending for six large Christian
denominations, matched to data on local New Deal spending. We
instrument for New Deal spending using measures of the political
strength of a state's congressional delegation, and confirm our
findings using a different instrument based on institutional
constraints on state relief spending. With both instruments we find
that higher government spending leads to lower church charitable
activity. Crowd-out was small as a share of total New Deal spending
(3%), but large as a share of church spending: our estimates
suggest that church spending fell by 30% in response to the New
Deal, and that government relief spending can explain virtually all
of the decline in charitable church activity observed between 1933
and 1939.
References
1. http://papers.ssrn.com/sol3/papers.cfm?abstract_id=723301
2.
http://www.amazon.com/exec/obidos/tg/detail/-/0807848417/ref=lpr_g_1/104-5390802-0456765?v=glance&s=books
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