Charity Ratings

Yörük, Bar{\i}{\c{s}} K., (2015). Charity Ratings. Journal Of Economics & Management Strategy, 25, 1, 195–219.

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Type of evidence: Causal-observational (IV etc)

Related tools: Quality ratings

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Paper summary

++++Yörük, Barış K. ““Charity ratings.”” Journal of Economics & Management Strategy 25.1 (2016): 195-219.|

  • We have data on charity ratings (here, from 'Charity Navigator') and on amounts each charity raises per year (public reporting)
    • Does a regression of amounts raised on the rating tell us the impact of the rating?
    • No! Better charities may get higher ratings and more donations because of their quality, not because of the rating.
    • Response: Look at changes in ratings/donation (fixed effect modeling)
    • But: ““time-variant unobservable charity characteristics that are correlated with charitable contributions may also be correlated with the third party ratings””
  • But note that the 'Charity Navigator' gives discrete 'star ratings' based on a continuous score
    • Class: Any idea how this can help?

““Regression discontinuity””: If we robustly control for the score, we can look at the effect of crossing a star threshold

  • Being 'just above' or 'just below' a threshold can be seen as random
  • But donors may react to the stars and not see the score itself; so crossing the threshold may have a large effect

Results:

  • No significant overall effect (contradicts previous literature)
  • Significant impact for small charities only: finds a nearly 20% effect of a one star increase
    • Argument: These charities are less well-known, so people rely more on this information


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This paper has been added by David Reinstein

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