The Percentage Law and the Mediation of Political Conflict

William Gavin Ekins

Major Professor: Kevin A. McCabe

Committee Members: Peter J. Boettke, Paul D. Aligica, Terrence Chorvat, The Mercatus Center

Enterprise Hall, Room 318
November 16, 2009, 07:00 PM to 07:00 PM

Abstract:

In the last 10 years, a new tax incentive for charitable giving has swept through Central and Eastern Europe. Known as the percentage law, it allows tax payers to give a portion of their income-tax burden to a not-for-profit organization (NPO) of their choice. Hailed as a method for increasing local participation in civil society, a form of the law has been adopted in 8 countries with several others considering its implementation. Using the analytical tools of public choice to frame historical events, this dissertation shows that it is conflict that drove the implementation of the law and not the demand for coordination in civil society. Furthermore, behavioral experiments show greater crowding-out effects under the law, while field interviews with leaders of NPOs confirm that the law has little impact on the participation of all but the largest NPOs. The study predicts that countries with heterogeneous preference are more likely to implement the percentage law than are countries with homogeneous preferences.

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