Culture change takes time Prof. dr. René Bekkers Center for Philanthropic Studies VU University Amsterdam

Belastingfaciliteiten Creatieve Industrie 12 oktober 2017 Belastingfaciliteiten Creatieve Industrie

What can other countries learn from the Dutch Experiment? Prof. dr. René Bekkers Center for Philanthropic Studies VU University Amsterdam

Charity law reform In 2012, a charity law reform in the Netherlands (“Geefwet”) enhanced the deductibility of donations to cultural nonprofit organizations and the freedom for organizations to earn commercial income. The stated objectives of the legal reform were: To increase donations and income raised from commercial activities; To decrease dependence on government funding. July 11, 2018 13th ISTR Conference

In theory… The charitable deduction reduces the price of giving. The charity law reduced the price of giving to cultural nonprofit organizations even further, for both individual as well as corporate tax payers. The price was not affected for other nonprofits. The European High Court approved the law in March 2013. This seems like a natural experiment. July 11, 2018 13th ISTR Conference

Potential effects for donors July 11, 2018 13th ISTR Conference

Potential effects for corporations July 11, 2018 13th ISTR Conference

Price effects in previous research Price effects on total giving range between -0.2 and -1.1. The price effect on the amount deducted among itemizers in the Netherlands is -0.9.* No study to date has specifically investigated price effects on giving to culture It is likely that giving to culture is more price sensitive because it is more prevalent among the wealthy * Source: Bekkers, R. (2012). The Limits of Social Influence on Giving. Paper presented at the workshop “Social influences and charitable giving”, Centre for Market and Public Organisation, University of Bristol, February 24, 2012. https://renebekkers.files.wordpress.com/2015/11/limits-of-social-influence-on-giving-paper5.pdf July 11, 2018 13th ISTR Conference

But at the same time… A cut of €220 million in government subsidies for cultural nonprofit organizations was accounced in 2011. By 2013, €253 million had in fact been cut. 40% of 346 government funded cultural nonprofits lost their subsidy. 17% of the 137 organizations that lost their subsidy went out of business. Local governments also cut >€90 million. July 11, 2018 13th ISTR Conference

So… The price reduction for cultural donations may have increased donations, but at the same time the cuts may also have affected the amount donated. This may have resulted in a positive effect (“crowding-out”), but also in a negative effect (“crowding-in”). The Ministry of Culture has called upon the cultural nonprofits to become more entrepreneurial, and raise more donations. July 11, 2018 13th ISTR Conference

CROWDING-OUT EFFECT: EMPIRICS Experimental studies: -0.64 Non-experimental studies: +0.06 De Wit, A. & Bekkers, R. (2016). Government support and charitable donations: A meta-analysis of the crowding-out hypothesis. Conditionally accepted by Journal of Public Administration Research and Theory July 11, 2018 13th ISTR Conference

Is a crowding out effect likely? In the Netherlands, the cut in government contributions to cultural institutions is likely to have had very little effect on the willingness to donate. An overwhelming majority of donors to cultural institutions, also the wealthy, said they were unwilling to compensate for government cuts. But perhaps a change in the behavior of institutions occurred, increasing solicitations and the sophistication of fundraising efforts. July 11, 2018 13th ISTR Conference

Entrepreneurship The cultural sector has been criticized for not being creative in earning income. Skills and capacity for fundraising and commercial activities were lacking. The Ministry of Culture subsidized the creation and participation of two programs, one in cultural leadership, and another in fundraising. Also a public awareness campaign was designed to inform the public about the Charity Law Reform. July 11, 2018 13th ISTR Conference

Our research questions After the Charity Law Reform, how did fundraising by cultural nonprofit organizations in the Netherlands change, and how did giving to cultural nonprofit organizations change? In addition, Which organizations reaped more benefits of the Charity Law Reform? July 11, 2018 13th ISTR Conference

How it could work July 11, 2018 13th ISTR Conference Investment in Fundraising income Charitable deduction reform Investment in fundraising Organizational capacity sales Sales Structural characteristics Cultural characteristics July 11, 2018 13th ISTR Conference

Program theory July 11, 2018 13th ISTR Conference Charitable deduction reform July 11, 2018 13th ISTR Conference

Program theory July 11, 2018 13th ISTR Conference Investment in Charitable deduction reform Investment in fundraising July 11, 2018 13th ISTR Conference

Program theory July 11, 2018 13th ISTR Conference Investment in Fundraising income Charitable deduction reform Investment in fundraising July 11, 2018 13th ISTR Conference

Program theory July 11, 2018 13th ISTR Conference Investment in Fundraising income Charitable deduction reform Investment in fundraising sales Sales July 11, 2018 13th ISTR Conference

Reform rewards investments Fundraising income Charitable deduction reform Investment in fundraising sales Sales July 11, 2018 13th ISTR Conference

Before Reform July 11, 2018 13th ISTR Conference Investment in Fundraising income Investment in fundraising Organizational capacity sales Sales Structural characteristics Cultural characteristics July 11, 2018 13th ISTR Conference

After Reform July 11, 2018 13th ISTR Conference Investment in Fundraising income Charitable deduction reform Investment in fundraising Organizational capacity sales Sales Structural characteristics Cultural characteristics July 11, 2018 13th ISTR Conference

“unto every one that hath shall be given” (Matthew 25:29) The Matthew effect More successful organizations become even more successful Organizations that raise funds and develop sales activities generate income Prior experience and current income allow organizations to build capacity and invest in fundraising These investments generate income “unto every one that hath shall be given” (Matthew 25:29) July 11, 2018 13th ISTR Conference

Giving to Arts & Culture Source: Giving in the Netherlands 2015 July 11, 2018 13th ISTR Conference

Donations to culture Random sample of households Source: Giving in the Netherlands 2013, 2015 and 2016 July 11, 2018 13th ISTR Conference

Donations to culture Among high net worth households Source: Giving in the Netherlands HNW oversamples July 11, 2018 13th ISTR Conference

Share of culture in total giving July 11, 2018 13th ISTR Conference

What citizens think about the multiplier July 11, 2018 13th ISTR Conference

How the deduction reform could affect fundraising and earned income of cultural nonprofits Charitable deduction reform Investment in fundraising Organizational capacity sales Sales Structural characteristics Cultural characteristics July 11, 2018 13th ISTR Conference

Results to be presented today Fundraising income Charitable deduction reform Information to donors Organizational capacity Investment in sales Sales Structural characteristics Cultural characteristics July 11, 2018 13th ISTR Conference

Total revenue rises Source: Fundraising by Cultural Nonprofits Figure shows proportion of institutions of varying size reporting increase in total revenue. 12% report no income at all in both years. July 11, 2018 13th ISTR Conference

Fundraising income increases Source: Fundraising by Cultural Nonprofits Figure shows proportion of institutions of varying size reporting increase in fundraising income. 40% report no income from donations. July 11, 2018 13th ISTR Conference

Larger institutions were more likely to inform donors about the Charity Law Reform and participate in the training program Source: Fundraising by Cultural Nonprofits July 11, 2018 13th ISTR Conference

Institutions telling donors about the legal reform were more likely to see donations increase Figure shows proportion of institutions of reporting increase in fundraising income. 63% report not providing information to donors about the legal reform. July 11, 2018 13th ISTR Conference

Changes in income x communication Figure shows average amount received in € from various sources. July 11, 2018 13th ISTR Conference

Investment in marketing + fundraising Source: Fundraising by Cultural Nonprofits July 11, 2018 13th ISTR Conference

Investment in marketing + fundraising Interns Volunteers Paid workers July 11, 2018 13th ISTR Conference

Has the charity law reform made the Dutch cultural sector more entrepreneurial? Probably yes. And more so for institutions that invested in fundraising and invested more. But total giving has not (yet?) increased. This could be a displacement effect within the cultural sector. We found no evidence for a substitution effect from other causes to cultural giving.

July 11, 2018 13th ISTR Conference

What can other countries learn from the Dutch Experiment? Do not expect miracles. Inform donors about the legal reform. Teach institutions how to be entrepreneurial and raise funds. Experiment: Design, Test, Learn, Adapt, and Share.

Requirements Investments in fundraising and alumni relations. Create networks of friends. Generate pride, commitment, group cohesion. Reciprocity: make friends feel they ‘owe’ you. Patience. It takes at least 30 years. Use insights in donor behavior and strategic partnerships. Develop propositions that are appealing to prospective donors. July 11, 2018 13th ISTR Conference

Eight Mechanisms in Philanthropy Awareness of need Being asked to give Costs and benefits Altruism: how much others are giving Reputation: social pressure and rewards Psychological costs and rewards Values Efficacy www.understandingphilanthropy.com July 11, 2018 13th ISTR Conference

Eight Mechanisms in Philanthropy People give more (often) when There is a clear need need They are being asked solicitation Costs are lower, and benefits are higher costs/benefits They care about the recipients altruism They receive social benefits reputation They receive psychological benefits self-rewards The cause matches their values values Donations are perceived to be efficient efficacy July 11, 2018 13th ISTR Conference

Contact René Bekkers r.bekkers@vu.nl @renebekkers Center for Philanthropic Studies VU University Amsterdam www.giving.nl renebekkers.wordpress.com July 11, 2018 13th ISTR Conference