Economics and Ethics
Kapitel 4
Kapitel 4
Kartei Details
Karten | 7 |
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Sprache | English |
Kategorie | VWL |
Stufe | Universität |
Erstellt / Aktualisiert | 17.05.2014 / 13.03.2015 |
Lizenzierung | Keine Angabe |
Weblink |
https://card2brain.ch/box/economics_and_ethics3
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Einbinden |
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Warm glow
giving undertaken to provide the donor with a good feeling
warm glow is a function only of the amount given g(x2)
warm glow is often considered selfish
implications fpr crowding out
Utility maximiation with warm glow in the standard treatment
First order condition
dU/dx2 =-v'(I-x2) + g'(x2)
rearranging and solving for the optimal value of x2
v' (I-x2)=g' (x2) --> m*2=x2*
where U' = 0
Utility maximization with warm glow in the tax treatment
Substituting into the dictator's utility function
U= v( I-x2-t) + g(x2)
Applying the first order condition
dU/dx2 = -v' (I-x2-t)+g'(x2) = 0
rearranging: v'(I-x2-t) = g'(x2) --> x2t
at the optimum, marginal material utility equals marginal warm glow
Crowding out with warm glow
prove crowding out by contribution (trying to find no crowding out)
standard: v'(I-x2) = g'(x*2)
tax: v'(I-x2-t) = g'(xt2)
if there is NO crowding out, x2* must be equal x2t,which is impossible, so there is crowiding out
Pure altriusn and crowding out
if crowding out is complete (one for one €)
x2t = x2*-t
but substitution can't be made, so: crowding out is incomplete under warm glow
facts of pure altriusm and warm glow
pure altriusm: Donors care about total benefit to recipeints
they respond to to tax transfer by reducing their donations by an equal amount
Crowding out is complete: cp= -1
warm glow: Donors care only about the contribution they make voluntary
taxes reduces their net income, so they reduce giving
since they derive no utility from taxtransfer, thex reduce givung by less than the tax.
Crowding our is incomplete -1< cw<0
Impure alriusm
pure altruism + warm glow
U=u(m1, m2, x2)
Additively seperable utility function
U= v(m1) +f(m2) +g(x2)
Crowding out is intermediate
-1=cp<ci<cw<0