Charity and Gift Exchange: Cultural Effects

Our intent in this paper was to provide experimental evidence for the Gift Exchange Mechanism in the context of charitable donations in Pakistan. We chose a simple and elegant experiment of Falk as the basis for our experiment. Due to institutional differences, we replaced his postal campaign for charitable donations by a door-to-door campaign. The additional opportunity for social interaction, and cultural differences, led to substantial and unexpected variation in the results. Most importantly, in direct contrast to results of Falk, both frequency and average size of donations declined with increasing gift size. Thus the GEM failed to operate in this experiment. We provide some potential explanations for this surprising result. Our experiment also provides some information on gender and income effects on charitable donations, which vary from main findings in the literature. In particular, we find that females contribute more in frequency and size, and that the share of giving declines with income.