New research published in the Journal of Economic Psychology found that donating to charity may improve a giver’s physical and emotional wellbeing. The study also suggested a link between increases in charitable tax subsidies, which have been found to spur giving, and improvements in people’s perceptions of their own health (which can be a good indicator of future healthcare use and mortality rates).
The Wall Street Journal spoke with the paper’s author, Baris K. Yörük, an associate professor of economics at the University at Albany-SUNY, about his findings. Here are edited excerpts (and you can read the full original article here):
WSJ: What did you set out to examine in this paper?
YÖRÜK: Studies in the economic and public-policy literature show that tax subsidies for charitable giving are quite effective in increasing personal donations. Studies in the medical literature find that giving to others reduces stress and strengthens the immune system. My study combines these ideas.
My hypothesis: If giving to others is better for health and if tax subsidies significantly increase charitable giving, then increasing tax subsidies may positively effect health.
WSJ: What did you find?
YÖRÜK: After I control for variables like income, family size, gender, employment status, race, educational attainment and marital status, I find the probability of reporting better health goes up as the tax subsidy for charitable giving increases.
The main variable I am interested in is a self-reported health index taken from the Panel Study of Income Dynamics, [a data set complied by the University of Michigan]. Survey respondents report their general health on a scale from one to five. Five is excellent health and one is poor.
A 1% increase in a tax subsidy for charitable giving is associated with a 0.1% increase in the health index. The effect is statistically significant, though very moderate. To go up one notch in the health index, say from three to four, implies an almost 200% increase in the tax subsidy, which is basically impossible.
I also find a positive relationship between charitable giving and self-reported health status. As the amount of the donation increases, health status improves.
Costs vs. Benefits
WSJ: The paper suggests tax subsidies might reduce the probability of suffering from certain diseases and psychological disorders. Can you elaborate?
YÖRÜK: Tax subsidies have a statistically significant impact on lung disease, arthritis and emotional disorders. This supports the main findings, but interpreting [each] individually is quite difficult. Emotional problems make sense because the medical literature also finds a positive effect of charitable giving on psychological wellbeing, but the positive impact on arthritis or lung disease is less clear.
The paper also shows that tax subsidies have a positive effect on high blood pressure, diabetes, cancer, heart attack and obesity, but the magnitude of these effects is small and not statistically significant.
WSJ: What are the paper’s policy implications?
YÖRÜK: My findings imply that further expansions in tax subsidies for charitable giving would positively affect the health status of individuals in the U.S., but more research is needed. I don’t provide a cost-benefit analysis in this paper. We could calculate the foregone tax revenue that comes with a 1% increase in tax subsidies and the economic benefit of a 0.1% increase in society’s health status and then compare those two numbers.
WSJ: The paper says the federal government forwent about $47 billion in revenue due to charitable deductions in 2012. How likely is it that the health benefits could outweigh the cost?
YÖRÜK: You never know. It’s possible.
Make a donation now and you can receive a tax subsidy for 2016 (and an improvement in your wellbeing too!)
