1. Has the charity law reform made the Dutch cultural sector more entrepreneurial? Prof. dr. René Bekkers Center for Philanthropic Studies VU University Amsterdam Brussels, June 6, 2016

2. What can other countries learn from the Dutch Experiment? Prof. dr. René Bekkers Center for Philanthropic Studies VU University Amsterdam Brussels, June 6, 2016

3. 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. June 6, 2016FARO - KBS3

4. 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. June 6, 2016FARO - KBS4

5. Potential effects for donors June 6, 2016FARO - KBS5

6. Potential effects for corporations June 6, 2016FARO - KBS6

7. 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 7 * 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.pdfhttps://renebekkers.files.wordpress.com/2015/11/limits-of-social-influence-on-giving-paper5.pdf June 6, 2016FARO - KBS

8. 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. June 6, 2016FARO - KBS8

9. 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. June 6, 2016FARO - KBS9

10. CROWDING-OUT EFFECT: EMPIRICS 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 Crowding-Out Effect: Empirics Experimental studies: -0.64 Non-experimental studies: +0.06 June 6, 2016FARO - KBS10

11. 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. Is a crowding out effect likely? June 6, 2016FARO - KBS11

12. 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. June 6, 2016FARO - KBS12

13. Our research questions After the Charity Law Reform, 1.how did fundraising by cultural nonprofit organizations in the Netherlands change, and 2.how did giving to cultural nonprofit organizations change? In addition, 3.Which organizations reaped more benefits of the Charity Law Reform? June 6, 2016FARO - KBS13

14. How it could work Fundraising income Charitable deduction reform Investment in fundraising Organizational capacity Investment in sales Sales income Structural characteristics Cultural characteristics June 6, 2016FARO - KBS14

15. Program theory Charitable deduction reform June 6, 2016FARO - KBS15

16. Program theory Charitable deduction reform Investment in fundraising June 6, 2016FARO - KBS16

17. Program theory Fundraising income Charitable deduction reform Investment in fundraising June 6, 2016FARO - KBS17

18. Program theory Fundraising income Charitable deduction reform Investment in fundraising Investment in sales Sales income June 6, 2016FARO - KBS18

19. Reform rewards investments Fundraising income Charitable deduction reform Investment in fundraising Investment in sales Sales income June 6, 2016FARO - KBS19

20. Before Reform Fundraising income Investment in fundraising Organizational capacity Investment in sales Sales income Structural characteristics Cultural characteristics June 6, 2016FARO - KBS20

21. After Reform Fundraising income Charitable deduction reform Investment in fundraising Organizational capacity Investment in sales Sales income Structural characteristics Cultural characteristics June 6, 2016FARO - KBS21

22. 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) June 6, 2016FARO - KBS22

23. Giving to Arts & Culture Source: Giving in the Netherlands 2015 June 6, 2016FARO - KBS23

24. Donations to culture Random sample of households Source: Giving in the Netherlands 2013, 2015 and 2016 June 6, 2016FARO - KBS24

25. Donations to culture Among high net worth households Source: Giving in the Netherlands HNW oversamples June 6, 2016FARO - KBS25

26. Share of culture in total giving 26June 6, 2016FARO - KBS

27. 27 What citizens think about the multiplier June 6, 2016FARO - KBS

28. How the deduction reform could affect fundraising and earned income of cultural nonprofits Fundraising income Charitable deduction reform Investment in fundraising Organizational capacity Investment in sales Sales income Structural characteristics Cultural characteristics June 6, 2016FARO - KBS28

29. Results to be presented today Fundraising income Charitable deduction reform Information to donors Organizational capacity Investment in sales Sales income Structural characteristics Cultural characteristics June 6, 2016FARO - KBS29

30. Total revenue rises Source: Fundraising by Cultural Nonprofits June 6, 2016FARO - KBS30 Figure shows proportion of institutions of varying size reporting increase in total revenue. 12% report no income at all in both years.

31. Fundraising income increases June 6, 2016FARO - KBS31 Source: Fundraising by Cultural Nonprofits Figure shows proportion of institutions of varying size reporting increase in fundraising income. 40% report no income from donations.

32. Larger institutions were more likely to inform donors about the Charity Law Reform and participate in the training program Source: Fundraising by Cultural Nonprofits June 6, 2016FARO - KBS32

33. Institutions telling donors about the legal reform were more likely to see donations increase June 6, 2016FARO - KBS33 Figure shows proportion of institutions of reporting increase in fundraising income. 63% report not providing information to donors about the legal reform.

34. Changes in income x communication June 6, 2016FARO - KBS34 Figure shows average amount received in € from various sources.

35. Investment in marketing + fundraising June 6, 2016FARO - KBS35 Source: Fundraising by Cultural Nonprofits

36. Investment in marketing + fundraising June 6, 2016FARO - KBS36 Interns VolunteersPaid workers

37. 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.

38. What can other countries learn from the Dutch Experiment? 1.Do not expect miracles. 2.Inform donors about the legal reform. 3.Teach institutions how to be entrepreneurial and raise funds. 4.Experiment: Design, Test, Learn, Adapt, and Share.

39. CROWDING-IN RESULT Data from the Gallup World Poll show that citizens in countries in which the tax burden is higher are more likely to give to charity, suggesting a crowding-in effect Across Countries: Crowding-In The people of Belgium are less likely to give than the Dutch – although they face a similar tax burden June 6, 2016FARO - KBS39

40. Quality of data: best available evidence for giving by households Facts Giving in Europe Feasibility Study

41. Belgium vs Netherlands June 6, 2016FARO - KBS41 40% gives77% €174 mln€ deducted€760 mln €402 mln€ household giving€1.944 mln 11.1 mlnPopulation16.8 mln 392.7 blnGDP650.9 bln €36€ household giving per capita€116 0.001%€ household giving / GDP0.003% Source: Giving in Europe Feasibility Study – country report for Belgium, including data from Defeyt (2014), Indicateurs de la générosité des belges, http://www.iddweb.eu/docs/generbel2.pdf http://www.iddweb.eu/docs/generbel2.pdf Source: Bekkers, Schuyt, & Gouwenberg (2015). Geven in Nederland 2015: Giften, Sponsoring, Legaten en Vrijwilligerswerk. http://test.giving.nl/wp-content/uploads/2015/04/GIN201 5_summary.pdf http://test.giving.nl/wp-content/uploads/2015/04/GIN201 5_summary.pdf

42. 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. Requirements June 6, 2016FARO - KBS42

43. Eight Mechanisms in Philanthropy 1.Awareness of need 2.Being asked to give 3.Costs and benefits 4.Altruism: how much others are giving 5.Reputation: social pressure and rewards 6.Psychological costs and rewards 7.Values 8.Efficacy June 6, 2016FARO - KBS43 www.understandingphilanthropy.com

44. People give more (often) when 1.There is a clear needneed 2.They are being askedsolicitation 3.Costs are lower, and benefits are highercosts/benefits 4.They care about the recipients altruism 5.They receive social benefitsreputation 6.They receive psychological benefitsself-rewards 7.The cause matches their values values 8.Donations are perceived to be efficientefficacy Eight Mechanisms in Philanthropy June 6, 2016FARO - KBS44

45. Contact René Bekkers r.bekkers@vu.nl @renebekkers Center for Philanthropic Studies VU University Amsterdam www.giving.nl renebekkers.wordpress.com June 6, 2016FARO - KBS45