Li Zhang

Visiting Assistant Professor of Economics
Department of Economics
Lafayette College
307 Simon Center
Easton, PA, 18042
zhanli@lafayette.edu

Research

Publications

An Examination of the Effect of Inequality on Lotteries for Funding Public Goods
with Cary Deck and Christopher Oconnor
Journal of Public Economic Theory , Vol. 24(4) 733-55, 2022.
We experimentally study the impact of inequality on the effectiveness of contests for funding public goods in a development context. We observe that the typical result of a lottery funding mechanism leading to greater funding for the public good than predicted by theory extends to groups with inequality. However, while theory suggests that increased inequality should lower total contributions to a lottery funded public good, we observe the opposite pattern. This result differs from prior results for the standard voluntary contribution mechanism where increased inequality has been found to reduce public good provision. Moreover, we find that the poor do not contribute a greater share of their endowment to the public good than do the wealthy. Thus, overall our study demonstrates the potential for community development projects, when funded with a lottery mechanism, to be highly successful even in the presence of inequality and may facilitate a progressive redistribution of wealth.

Dissertation

A Structural Approach for Estimating the Value of Public Goods in a Cause-related Market
[PDF] (under review)

People often pay a premium for products linked to charity due to the belief that part or all the revenue generated from such purchases is a public good. However, accurately quantifying the value of public goods is challenging due to identification issues. This study aims to address this challenge by leveraging two sets of bidding data from eBay on charity and non-charity auctions of identical products. I employ an nonparametric approach to identify bidders' public goods values within an independent private values paradigm, providing a unique and valuable insight into the motivations behind charitable giving through auction data. Specifically, by using the variation in donation percentages in the charity auction set, this study develops structural altruistic estimators to uncover each bidder's latent private value, which is a combination of the value of the auction item and the linked public good. In the non-charity auction set, the latent private value of each bidder is identified based on the auction item alone. Then the difference between the latent private values of the two sets is used to determine the value placed on charity-linked products, assuming that the two sets have the same underlying distribution of private values on the auction item. The results show that on average, bidders bid 6\% more in charity auctions compared to non-charity auctions, driven primarily by the warm glow of giving, the joy from the act of giving.
The Price Elasticity of Charitable Giving: A Systematic Review and Meta-analysis
with Michael K. Price and John A. List [PDF]

Given the threshold role of the unit elasticity in determining whether the current tax policy is effective in terms of encouraging charitable giving, a clear conclusion on the relationship between the estimated price elasticity and unit elasticity is required. However, studies on this topic report mixed results in terms of the magnitude of price elasticity. To investigate the heterogeneity between studies on estimating the price elasticity of charitable giving, we identify and synthesize 81 studies with 113 point estimates. By doing so, we updated the robust estimation of the elasticity. We also contribute a better understanding of the current mixed results on this topic by exploring the potential moderators. These moderators in turn shed light on the future research direction.
Individual-level Price Elasticity of Charitable Giving: Insights from Large-scale Field Experiments
with John A. List, Daniel J. Lee, and Michael K. Price[PDF]

This study investigates the individual-level price elasticity of charitable giving by employing a field experiment coupled with a structural estimation. Our findings reveal an average price elasticity of -1.22, suggesting that a 10% increase in the price of giving leads to a 12.2% decrease in charitable contributions. Notably, the analysis highlights considerable heterogeneity in price elasticity across various demographic and behavioral factors, such as age, education, income, rationality, and political affiliation. A more pronounced distribution of price elasticity is observed within subgroups as opposed to across subgroups, indicating greater heterogeneity within categories than between them. Simulation results demonstrate that disregarding within-group heterogeneity in price elasticity can result in inaccurate policy implications, especially regarding the influence of tax policies on charitable giving. Overall, the study emphasizes the significance of accounting for differences in price elasticity both across and within subgroups, with particular attention to within-subgroup variations, for a precise estimation of policy intervention effects on charitable giving.

Working papers beyond dissertation

Early Childhood Exposure to Maternal Depression: Health and Cognitive Development in India and Vietnam
(The draft is available upon request)

This study explores the impact of early childhood exposure (6-18 months) to maternal depression on children's health and cognitive development, using unique survey data from two low- and middle-income countries. Focusing on the younger cohort of the Young Lives Study (YLS), which tracks 8,062 children over 15 years, we use propensity score matching to assess the effects on a composite health indicator(combining perceived health status and growth metrics including weight-for-age, height-for-age, BMI-for-age z scores), as well as cognitive outcomes, including vocabulary, math, and Peabody Picture Vocabulary Test (PPVT) scores. Our findings indicate that early exposure to maternal depression has significant negative effects on health across all five rounds of the 15-year tracking period. Affected children have poorer health, with reduced PPVT and math scores in later tracking period, though vocabulary scores were not significantly affected. While further research is needed to fully understand the underline mechanisms, we do find that early exposure significantly worsens parent-child relationships, highlighting a critical area for intervention. Importantly, health impacts not only represent a direct effect of maternal depression but also potentially mediate the adverse effects on cognitive development, amplifying negative outcomes.
Why are Nonprofit Exit Rates So Low? Toward an Understanding of the Driving Factors
with Teresa D. Harrison, Jonathan Dxley, and Michael K. Price(The draft is available upon request)

Recent research into the nonprofit exit rates indicates that the annual rate of nonprofit exit in a given year ranges from 1\% to 3\% per year. Using a dataset consisting of all publicly available nonprofit filings from 1989-2018, we employ a variety of descriptive analysis techniques to begin to understand the low levels of nonprofit exit. We examine nonprofit exits in relation to internal factors such as nonprofit age, subsector, and size, along with external factors such as business cycle fluctuations and the policy environment. In doing so, we contribute to the industrial organization literature examining nonprofit organizations and provide a roadmap for future research to causally understand the mechanisms driving the lack of nonprofit exit.

Research In Progress

Beyond Charity Watchdogs: How Stakeholder Evaluations Affect Nonprofit Donations
with Daniel Lee and Tome Guerreiro D O Salgueiro (The slides are available upon request)

This study explores the impact of audience evaluations on charitable contributions to nonprofit organizations, an area less studied than the effects of charity watchdog ratings based on financial metrics. Using data from 108,808 reviews on GreatNonprofits.org, we calculate annual average ratings from donors, clients, volunteers, and other stakeholders and combine these with financial data from 990-Forms. Through two-way fixed effects models and Regression Discontinuity (RD) design, we find that overall, audience ratings do not significantly affect donations. However, for larger charities, a one-star increase in ratings leads to a 13% decrease in contributions, particularly in arts and health. Ratings only matter for charities with 3 or 4 stars, not those with 1 or 2 stars. While hybridity and program expense ratios do not mediate this relationship, total assets and fundraising efficiency significantly impact ratings, suggesting potential mediating roles. These findings highlight the importance of leveraging audience feedback to enhance fundraising, especially for larger charities in specific sectors.

Home

Research

Teaching


Li Zhang Visiting Assistant Professor of Economics Department of Economics Lafayette College 307 Simon Center Easton, PA, 18042 zhanli@lafayette.edu

Research Publications An Examination of the Effect of Inequality on Lotteries for Funding Public Goods with Cary Deck and Christopher Oconnor Journal of Public Economic Theory , Vol. 24(4) 733-55, 2022. We experimentally study the impact of inequality on the effectiveness of contests for funding public goods in a development context. We observe that the typical result of a lottery funding mechanism leading to greater funding for the public good than predicted by theory extends to groups with inequality. However, while theory suggests that increased inequality should lower total contributions to a lottery funded public good, we observe the opposite pattern. This result differs from prior results for the standard voluntary contribution mechanism where increased inequality has been found to reduce public good provision. Moreover, we find that the poor do not contribute a greater share of their endowment to the public good than do the wealthy. Thus, overall our study demonstrates the potential for community development projects, when funded with a lottery mechanism, to be highly successful even in the presence of inequality and may facilitate a progressive redistribution of wealth. Dissertation A Structural Approach for Estimating the Value of Public Goods in a Cause-related Market [PDF] (under review) People often pay a premium for products linked to charity due to the belief that part or all the revenue generated from such purchases is a public good. However, accurately quantifying the value of public goods is challenging due to identification issues. This study aims to address this challenge by leveraging two sets of bidding data from eBay on charity and non-charity auctions of identical products. I employ an nonparametric approach to identify bidders' public goods values within an independent private values paradigm, providing a unique and valuable insight into the motivations behind charitable giving through auction data. Specifically, by using the variation in donation percentages in the charity auction set, this study develops structural altruistic estimators to uncover each bidder's latent private value, which is a combination of the value of the auction item and the linked public good. In the non-charity auction set, the latent private value of each bidder is identified based on the auction item alone. Then the difference between the latent private values of the two sets is used to determine the value placed on charity-linked products, assuming that the two sets have the same underlying distribution of private values on the auction item. The results show that on average, bidders bid 6\% more in charity auctions compared to non-charity auctions, driven primarily by the warm glow of giving, the joy from the act of giving. The Price Elasticity of Charitable Giving: A Systematic Review and Meta-analysis with Michael K. Price and John A. List [PDF] Given the threshold role of the unit elasticity in determining whether the current tax policy is effective in terms of encouraging charitable giving, a clear conclusion on the relationship between the estimated price elasticity and unit elasticity is required. However, studies on this topic report mixed results in terms of the magnitude of price elasticity. To investigate the heterogeneity between studies on estimating the price elasticity of charitable giving, we identify and synthesize 81 studies with 113 point estimates. By doing so, we updated the robust estimation of the elasticity. We also contribute a better understanding of the current mixed results on this topic by exploring the potential moderators. These moderators in turn shed light on the future research direction. Individual-level Price Elasticity of Charitable Giving: Insights from Large-scale Field Experiments with John A. List, Daniel J. Lee, and Michael K. Price[PDF] This study investigates the individual-level price elasticity of charitable giving by employing a field experiment coupled with a structural estimation. Our findings reveal an average price elasticity of -1.22, suggesting that a 10% increase in the price of giving leads to a 12.2% decrease in charitable contributions. Notably, the analysis highlights considerable heterogeneity in price elasticity across various demographic and behavioral factors, such as age, education, income, rationality, and political affiliation. A more pronounced distribution of price elasticity is observed within subgroups as opposed to across subgroups, indicating greater heterogeneity within categories than between them. Simulation results demonstrate that disregarding within-group heterogeneity in price elasticity can result in inaccurate policy implications, especially regarding the influence of tax policies on charitable giving. Overall, the study emphasizes the significance of accounting for differences in price elasticity both across and within subgroups, with particular attention to within-subgroup variations, for a precise estimation of policy intervention effects on charitable giving. Working papers beyond dissertation Early Childhood Exposure to Maternal Depression: Health and Cognitive Development in India and Vietnam (The draft is available upon request) This study explores the impact of early childhood exposure (6-18 months) to maternal depression on children's health and cognitive development, using unique survey data from two low- and middle-income countries. Focusing on the younger cohort of the Young Lives Study (YLS), which tracks 8,062 children over 15 years, we use propensity score matching to assess the effects on a composite health indicator(combining perceived health status and growth metrics including weight-for-age, height-for-age, BMI-for-age z scores), as well as cognitive outcomes, including vocabulary, math, and Peabody Picture Vocabulary Test (PPVT) scores. Our findings indicate that early exposure to maternal depression has significant negative effects on health across all five rounds of the 15-year tracking period. Affected children have poorer health, with reduced PPVT and math scores in later tracking period, though vocabulary scores were not significantly affected. While further research is needed to fully understand the underline mechanisms, we do find that early exposure significantly worsens parent-child relationships, highlighting a critical area for intervention. Importantly, health impacts not only represent a direct effect of maternal depression but also potentially mediate the adverse effects on cognitive development, amplifying negative outcomes. Why are Nonprofit Exit Rates So Low? Toward an Understanding of the Driving Factors with Teresa D. Harrison, Jonathan Dxley, and Michael K. Price(The draft is available upon request) Recent research into the nonprofit exit rates indicates that the annual rate of nonprofit exit in a given year ranges from 1\% to 3\% per year. Using a dataset consisting of all publicly available nonprofit filings from 1989-2018, we employ a variety of descriptive analysis techniques to begin to understand the low levels of nonprofit exit. We examine nonprofit exits in relation to internal factors such as nonprofit age, subsector, and size, along with external factors such as business cycle fluctuations and the policy environment. In doing so, we contribute to the industrial organization literature examining nonprofit organizations and provide a roadmap for future research to causally understand the mechanisms driving the lack of nonprofit exit. Research In Progress Beyond Charity Watchdogs: How Stakeholder Evaluations Affect Nonprofit Donations with Daniel Lee and Tome Guerreiro D O Salgueiro (The slides are available upon request) This study explores the impact of audience evaluations on charitable contributions to nonprofit organizations, an area less studied than the effects of charity watchdog ratings based on financial metrics. Using data from 108,808 reviews on GreatNonprofits.org, we calculate annual average ratings from donors, clients, volunteers, and other stakeholders and combine these with financial data from 990-Forms. Through two-way fixed effects models and Regression Discontinuity (RD) design, we find that overall, audience ratings do not significantly affect donations. However, for larger charities, a one-star increase in ratings leads to a 13% decrease in contributions, particularly in arts and health. Ratings only matter for charities with 3 or 4 stars, not those with 1 or 2 stars. While hybridity and program expense ratios do not mediate this relationship, total assets and fundraising efficiency significantly impact ratings, suggesting potential mediating roles. These findings highlight the importance of leveraging audience feedback to enhance fundraising, especially for larger charities in specific sectors.		Home Research Teaching CV