Funding for Disaster Recovery: Increased Taxes or Charitable Donations to Nonprofits?

Abstract

Governments oftentimes fail to satisfy high demanders of public services, leaving room for the nonprofit sector. How can the government deal with this government failure? Must it resort to tax increases or should it engage the nonprofit sector? Using the public polls conducted in the wake of Hurricane Katrina, this study aims to explore an empirical answer to this question. In particular, we contrast the determinants of the willingness of an individual to pay more tax with those of the willingness to make more voluntary donations for the disaster recovery purposes. The results show that attitudes on governments' roles in disaster recovery are not consistent with charitable giving behavior and are affected more by the survey respondents' political orientation than voluntary motivation. We discuss this finding's implication for designing a more effective disaster response system.