The Effects of Unearned Income on Philanthropic Behavior
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Abstract
With the greatest intergenerational transfer of wealth in history on the horizon (Hall, 2019), it is imperative for charitable organizations to understand if inherited money should be treated differently than earned money. This 2x2 experiment employed a non-probability convenience sampling methodology to recruit 163 online participants (n=163) from MTurk to participate in the online experiment. Two of the groups were asked to complete the Big Five Personality Test, while the others were awarded the compensation without completing the survey. The primary purpose of this quantitative research experiment was to test whether the means of compensation and level of compensation changes an individual’s philanthropic behavior in a voluntary contribution mechanism (VCM) experiment. An ANOVA was utilized to indicate if a statistically significant relationship was present with either variable. Second, after a significance level was identified (p=.006) with means of compensation through the ANOVA, the results were further analyzed using a binary logistic regression which also resulted in a significance value less than the alpha at .05 (p=.010). The first hypothesis (level of compensation) could not be supported, while the latter hypothesis (means of compensation) is supported. Findings indicate that there is a statistically significant difference between groups when categorized by earned and unearned compensation, but no demonstrable difference between groups when categorized by high and low compensation. The results from this study may help nonprofit leaders better understand the extent to which the endowment effect (Kahneman & Tversky, 1984) impacts charitable giving.