Would society be better off with fewer nonprofit organizations? If donors have heterogeneous preferences, then they will benefit from greater nonprofit variety, and proliferation is more likely to be socially beneficial. At the community level, it is clear that higher community giving rates and nonprofit density are correlated (Lecy and VanSlyke 2012). This relationship holds true when controlling for city and year fixed effects, government funding, and population, among other factors. What determines this relationship and the causal direction between giving and nonprofit density (if any) is unclear.

To understand if greater nonprofit variety drives increased giving, I use the closed “market” of the Combined Federal Campaign (CFC) and a quasi-experiment dose-response design to capture the causal relationship between the number and types of nonprofits participating and giving propensity and amount. CFC data is ideal for answering questions about the effect of nonprofit market characteristics on donor behavior. First, the campaign is nationwide and reaches individuals in all federal workplaces, from agency heads to postal workers. The CFC is the largest workplace giving campaign in the nation. It consists of 200+ local campaigns with more than 20,000 participating charities and more than $250 million in donations (OPM 2012). Second, the charitable solicitation process is largely regulated under federal law, and therefore is quite standardized across regions. Because each individual is able to give only to the designated list of charities, the donor decision can be more simply analyzed. Individual decisions to donate are naturally influenced by the solicitation process, so it is beneficial that the CFC data allows researchers to abstract away from questions of the solicitation process and to observe the set of soliciting charities.

The U.S. Office of Personnel Management (OPM) has provided aggregate data from 2004 to 2010 for this work. For each region, in each year, I know the list of charities participating, the giving to each federation (and charities participating outside of federations at the national level), the total giving (from payroll deduction and through other means), the total number of employees, and the number of employees giving.

I analyze the CFC data using a quasi-experimental design based on an exogenous change in competition. Following a court case, the federal government changed its participation restrictions for the 2007 campaign (Lipman & Williams 2007). It dropped requirements that participating nonprofits had overhead ratios below 25%, leading to increases in nonprofit participation. Furthermore, some markets were affected more by this ruling than others. This can be thought of as an exogenous change in competition, or a natural quasi-experiment. Using aggregate data across markets and over time, I perform a reduced-form dose-response analysis to answer questions about the effect of CFC participation expansion on the number of donors, the average donations per donor, and the average aggregate donations to charities that existed pre-expansion.

In my analysis, I illuminate both the effect of nonprofit market characteristics on donor behavior and the implications of this relationship for theories about nonprofit proliferation and social welfare.