Saturday, July 23, 2011

Perceived benefit: How alumni donations vary with child age

Do alumni donors expect reciprocity in admissions decisions?  Does this expectation influence giving, even when the university makes no such promises?  Professor Jonathan Meer of Stanford University and Harvey Rosen of Princeton University investigated this question.  They examined 24 years of donor information from a selective university.  These records included 487,913 “donor years” from 32,488 alumni.

As the alumni donors’ oldest children aged, the probability of making a gift gradually increased.  However, among those whose children would later apply to the university, the likelihood of giving increased dramatically from the time the child was age 14 until age 18.  Conversely, among those whose children did not later apply to the university, the likelihood of giving gradually declined during age range.  This suggests that some alumni parents were making gifts with an eye towards their child’s application.  This pattern existed even without any promises of such reciprocity from the university.

What happened to these donors after the admission decision was made?  If the child was not accepted, the likelihood of donating plummeted, falling far below those alumni whose children of the same age had not applied.  This dramatic drop was essentially permanent.  Indeed, the likelihood of giving for these alumni continued to fall in future years. 

For those whose children were accepted, the likelihood of donating remained high immediately after acceptance, but then gradually fell each year afterwards.  In addition, the gifts made after acceptance were much more likely to be directed gifts.  For example, while those whose child was accepted were only 3.4 percentage points more likely to make a directed gift when the child was age 17, they were 16.5 percentage points more likely to make a directed gift when the child was 21.  This tendency to make directed gifts diminished after the child was past typical college age.  While post-acceptance giving would not influence an admissions decision, directed giving could go to those specific programs that would benefit the attending child.  Thus, one form of reciprocity may be substituted for another.

            All of these same trends also occurred when measuring the total amount of giving, rather than just the likelihood of giving.  Similarly, these same trends occurred when examining the donor’s youngest child instead of the oldest child.  In fact, the drop in giving likelihood was even stronger following a rejection of the youngest child.  (This perhaps relates to the absence of any possible reciprocity from future acceptance decisions.)

            Taken together, this study suggests that alumni donors act as if they do expect reciprocity in admissions, even when the university makes no such promises.  Although donors give for many reasons other than self-interest, there does appear to be some consideration for reciprocity in these donor patterns.  Such a perceived admissions benefit could enhance giving; but it is risky.  If the university later violates the expectation, giving falls much further than for those who never had a child apply.

Citation: American Economic Journal: Economic Policy, volume 1, pp. 258-286.

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