Bittschi, Dwenger, and Rincke (2020) on Nudging Donor Loyalty

Benjamin Bittschi, Nadja Dwenger, Johannes Rincke, “Water the Flowers You Want to Grow? Evidence on Private Recognition and Donor Loyalty.” CESifo Working Paper No. 8424, July 2020. 

• Nonprofit organizations often are heavily reliant on recurring donors; most studies of how to nudge contributions look at one-time, not recurring, donations. 

• Can a nice “thank you” message enhance donor “warm glow,” and motivate donors to continue their support? 

• Germany has a church tax, where church members are assessed a surcharge of 8 percent on their income taxes to finance the church. (In the sample in this article, the amount of the tax averages 478 euro per year, but with significant variance.) 

• The connection to the personal income tax makes the church tax progressive – like the fee structure for American Economic Association members? – and low-income church members pay no church tax.

• The church tax, which is automatically deducted from paychecks, is a default for anyone who is baptized, though individuals can opt out of paying it! Opting out requires “an official declaration made in person at a district court [p. 5].” People who opt out cannot enjoy the full panoply of church-provided services. 

• The authors conduct a large-scale field experiment, n≈198,000, circa 2015. Half the sample receive a letter thanking them for their church tax payments and are told that they are making “an important contribution to our community.” This is termed “a private recognition treatment.” (A postal survey of n≈1,000 provides another source of data.)

• The issue examined is how the receipt of the letter affects opt-out rates in the coming 12 months. 

• The survey suggests that people who receive the thank-you note hold higher opinions of the church and feel more appreciated. (Receipt of the letter does not make people feel better about the government.)

• The thank-you note seemingly does reduce opt-outs over the course of the year, perhaps by as much as 9% -- the “extra” church taxes collected exceed the costs of mailing the letters! The letter seems particularly effective at keeping low-income church members involved. 

• The highest-income people increase their opt-outs, however, immediately after receiving the letter, though over the course of the year, the receipt of the letter doesn’t seem to change opt-out rates of the wealthy.

• The century-plus imposition of church taxes collected by the German state might be doomed, letter or no letter, as people quit church to avoid the tax.