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Three essays in public economics: flat taxes, foundation operations and giving


Kryvoruchko, Iryna (2013). Three essays in public economics: flat taxes, foundation operations and giving. Master's thesis / Doctoral dissertation.


This thesis empirically investigates two distinct themes in public economics: tax policy and the economics of the charitable sector. The first chapter of the thesis examines the first theme of tax policy and focuses on how a change in the income tax affects labour market behaviour in Russia. The second theme of the economics of the charitable sector is explored in the final two chapters of the thesis. These chapters analyze the role of Canadian foundations in the provision of charitable goods.

The first chapter examines the effect of Russia's flat tax reform on two employment dimensions: primary vs. secondary and official vs. unofficial. The chapter shows that individuals respond to lower taxes by devoting less time to primary and secondary employment. Official and unofficial employment, however, remain unaffected by the flat tax reform.

The next two chapters depart from tax policy and study the role of foundations in the Canadian charitable sector. The second chapter of the thesis provides new evidence on the size-based operation of foundations and their financial structure in Canada. A third of foundations operating in Canada are quite small, with assets of less than $25,000. The remaining foundations can be classified as medium (with assets more than $25,000 and never more than one million dollars in a given year) or large (with assets of one million dollars in at least one year). Over the last 20 years, there are only small differences in the growth and use of funding between public and private medium-size foundations. For the large-scale foundations, we observe distinct differences in the expenditures of private and public foundations. Private foundations distribute more of their expenditures to other charities whereas public foundations devote more of their expenditures to internal activities.

The final chapter of the thesis explores the impact of foundation grants to charities on the private donations received by these charities. Theoretically, foundation grants have two competing effects on private donations: a negative crowd-out effect and a positive information effect. An overall positive effect prevails only if the positive effect of signaling information about charity quality outweighs the negative crowd-out effect. With data on Canadian social welfare and community charities matched to their specific foundation donors, this chapter empirically examines the overall effect and finds that an additional dollar of foundation grants to Canadian charities crowds-in private giving to these organizations on average by 3.70 dollars.


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Kryvoruchko, Iryna