Non-standard matches and charitable giving
Author: Michael Sanders
Non-standard matches and charitable giving
The use of incentives to encourage charitable donations is commonplace. The governments of most developed countries (including the UK), as well as many large employers, offer match rates, or rebates to encourage donations. The principle behind such match rates is simple. With Gift-Aid, the UK’s main form of tax effective giving, a donation of £1 from net-of-tax income by a taxpayer attracts basic rate tax relief, which goes straight to the charity – hence, the charity receives £1.25 for every £1 donated.
The effect of this is to reduce the price of donating a given amount – if I am a basic rate taxpayer, and think “I want the British Heart Foundation to receive £100”, making that happen will only cost me £80 from my net of tax spending.
There is much discussion, both in the academic economics literature and in the public sphere, about the effectiveness of such matches, particularly in the aftermath of last year’s proposed £50,000 cap on charitable tax relief – although most studies find that people’s donations are relatively unresponsive to changes in the match rate (they are price inelastic), CMPO research has shown that high value donors may be more responsive to changes in their match (or rebate) than are smaller donors.
This mixed evidence on the effectiveness of matches at increasing out-of-pocket donations suggests that alternatives to the standard match may be more effective. Options for non-standard matches are summarized in our new working paper, which draws on the behavioural economics and psychology literatures to several such possibilities, including, non-linear matches, where the more an individual donates, the higher the match rate; social and team matches, in which the match rate received by one donor depends on the donations of others, giving them an incentive to ‘crowd in’ their friends and colleagues; competitive matches , when only the most successful fundraisers receive a match); and lottery matches, where each donation increases the chance of a donor’s chosen charity receiving a large windfall match.
Although these suggestions are sound in principle, and supported by both theory and empirical evidence, none has been experimentally tested in a real world setting. We would encourage anybody interested in testing one or more of these novels matches to contact us.
Education spending, pupil attainment and causality
Author: Simon Burgess
Education spending, pupil attainment and causality
In these hard times, spending government money effectively is more important than ever. Last week Fraser Nelson challenged the effectiveness of spending in schools, one of the areas relatively protected from Coalition cuts. He said: “The biggest surprise, though, was the money: no matter how you split the figures, the amount spent didn’t seem to make the blindest bit of difference”, his reading of a report by Deloitte commissioned by the Department for Education.
What is the evidence? In fact, it is surprisingly difficult to establish the impact of spending more money on student achievement. This is partly shortage of data (researchers always want more data), but there is a more fundamental reason too.
Perhaps inadvertently, Fraser Nelson illustrated the difficulty in his first paragraph. He noted the variation in per-pupil expenditure “ranging from £4,500 in Lyme Regis to £10,000 in Salford.” This is absolutely right – there are very significant variations in revenue per pupil. But the key point is that these are not random: extra resources are explicitly and systematically directed towards schools in poorer neighbourhoods. The mechanism, accreting the new schemes of each successive government, may be incomprehensibly complex, but the intent is surely right.
Getting back to our question, on the one hand we have this systematic distribution of resources towards poorer neighbourhoods. On the other hand we know that pupil attainment is typically lower in schools in such neighbourhoods; not for every pupil, not in every school, but on average. So if money has no impact on attainment, and we line up pupil attainment and school expenditure, we will tend to see a negative relationship. This derives solely from the way that money is distributed to schools. The fundamental problem is that there are two things going on with opposite effects: low attainment is associated with more money (via the schools funding system) and more money may be associated with high attainment (via the education process). With no other information, there is simply no way of disentangling these two opposing effects, and by itself these numbers can tell us nothing about the causal impact of school expenditure on pupil attainment.
So the view that “the amount spent didn’t seem to make the blindest bit of difference” cannot be supported by this evidence.
What of the wider research evidence, based on studies with a plausibly causal research design? One of the most prominent economists in the field of education, Rick Hanushek from Stanford, is famously sceptical of the value of greater resources for schools. There certainly are studies that show money can matter, but it is probably fair to say that the majority view among economists is that simply providing more resources for schools is not the best option.
The really interesting question is this: why doesn’t more money raise attainment? More money usually helps most things. Either there simply is nothing that schools can buy that raises attainment. This seems unlikely, and would certainly be a surprise to parents paying many thousands of pounds to send their children to private schools. Or there are features of the system which lead schools to spending extra resources on the ‘wrong’ things – things that have little impact on attainment. This might be the manner in which the money is distributed by government (typically short-term, making long-term expenditure decisions risky); or the regulations and agreements governing its spending by schools; or other factors. We have speculated a little about this here.
Coincidentally, the Department for Education has just opened a consultation on school efficiency – they await your views.
Does ‘the gap’ matter to children eligible for free school meals?
Author: Rebecca Allen
Does ‘the gap’ matter to children eligible for free school meals?
David Laws, the Liberal Democrat Minister for Schools, has been making a series of speeches over the past month about “closing the gap” in the attainment between pupils from deprived and more affluent backgrounds. Yesterday, he warned that schools should not be judged as outstanding by Ofsted if they failed to close the gap, a goal that sounds fair and even laudable in principle, but I believe is rather unfair in practice.
The “gap” is the difference in GCSE achievement between the average for pupils who are eligible for free school meals and the average for those who are not. Pupils eligible for free school meals have similar characteristics across schools since they all come from families claiming some sort of benefit. The problem is that the background of pupils who are not eligible for free school meals (FSM) will vary considerably across schools, since the group includes both those with bankers and with cleaners as parents.
A school may substantially narrow the gap by working hard to improve the attainment of their most deprived children, or through the accident of the characteristics of their non- eligible children. I have written before that very deprived schools tend to have very small gaps, a quirk I first spotted as a governor of a school that was struggling to produce strong academic results but was very proud that its FSM gap was zero. All the students at the school came from low income families living on a very large and universally deprived council estate. Some of the families happened to claim benefits that made them eligible for free school meals (not necessarily the poorest), others didn’t or couldn’t. Not surprisingly, the GCSE performance of the FSM and non-FSM pupils in this school were no different, on average, because these pupils were no different in their social or educational background. Nothing the school was doing contributed to this supposed “success” in “closing the gap”.
Social class disadvantage is an important national policy problem but I do not believe that schools should be deciding policies based on the size of their FSM attainment gap. What matters to children from low-income families is that a school enables them to achieve a qualification to get on in life. If a low-income student gets a low quality education from a school, it is little consolation or use for them to learn that the school served the higher income students equally poorly (i.e. the school’s “gap” was small).
As it turns out, great schools tend to be great schools for all children in the school – the statistical correlation between who does well for FSM children and who does well for non-FSM children is very high. Moreover, schools can make a difference to the life chances of FSM children – there are huge differences in attainment for these children across schools, far larger than there are for children from wealthy backgrounds who do pretty well in all schools.
Should the pupil premium be used exclusively for FSM children?
In an earlier speech David Laws threatened to ring fence the pupil premium money to force schools to spend it on their FSM pupils, rather than throwing it into the general pot of schools money. (The pupil premium is the policy tool by which schools are supposed to “close the gap”). I worry about this type of restriction in spending on certain activities, not least because the FSM children are not always from the poorest families in the school – the very act of claiming benefits means some family income leapfrogs those of others that work. More practically, students eligible for free school meals are not segregated into special classrooms, so it is rather difficult to spend the pupil premium on important things such as teaching and learning without the benefits spilling over to other children who sit in the classroom with them.
Free school meals children do not have educational needs that are unique or particularly distinctive. Like other children, excellent teaching and support for their learning is a good place to start. I do not deny that social deprivation in the home spills into schooling and it is clearly possible to target this via attendance incentives, breakfast clubs, homework clubs and tutoring support. But I believe schools would find it morally and emotionally difficult to exclude a child who is not on FSM from accessing these schemes if they could clearly benefit from them.
I hope that my very specific criticisms of an admirable policy do not detract from the urgency of understanding and reducing the size of social class gaps in educational achievement in England. Schools must engage in the evidence on resourcing and pupil achievement and make careful, deliberate budget decisions that improve pupil learning, particularly for those who are most educationally disadvantaged in their school. This may mean spending the pupil premium to retain the best teachers, introduce policies to improve teaching practice or even an “approved” activity targeted very specifically on more deprived children in the school.
However, I suspect that in trying to support the attainment of FSM-eligible children, a school might inadvertently help those not eligible too. Is this such a bad outcome? And if not, why do we use a “gap” metric that “punishes” a school for improving the attainment of those not eligible, as much as it does allowing the attainment of more deprived children to fall behind?
This post was first published on the IOE London Blog
Marathon Fundraising
Author: Sarah Smith
Marathon fundraising
The 2013 London marathon is in less than a week’s time. The hard slog of training behind them, most runners will be easing up, resting their legs before the real thing. Over the last few months, many will have sought training tips to improve their running, but what about the thousands of runners who are using the London marathon as a way of raining money for charity? What are some of the top tips for how they can achieve a fundraising personal best?
David Reinstein from Essex University has started an interesting discussion of research that fundraisers might find relevant. At CMPO, we have also begun looking at the rich data available from online fundraising website Justgiving.com to gain further insights into charitable fundraising.
The good news for marathon runners is that they have chosen a good event. Compared to fundraisers doing other events – cycling, parachuting, birthdays and other running events – London marathon fundraisers tend to have more donors (29 is the typical number) and raise more money overall (between £800 and £900 is typical).
Most marathon pages have a fundraising target. This seems to work. Compared to having no target, pages which specify a target amount get more donations and higher average donations. Donors clearly respond to the target – when the total amount raised gets close to the fundraiser’s goal, donors increase their donations to hit the target, but they give less once the target has been reached. With this in mind, raising the target could be one way to keep donations high.
Donors are also responsive to how much others have given. Arriving at a fundraising page, each donor can see how much other people have given and this information affects how much they give. A generous donation to a page – particularly made early on – can have a positive effect on later amounts given. Our results suggest that a one-off donation of £100 leads to around a £10 increase in the amounts given subsequently. Some of the effect comes through the fact that this kind of large donation triggers other people to match it; but there is also a wider, positive effect. Small donations, on the other hand, result in subsequent donors giving less. So, fundraisers have an additional incentive to encourage their friends, family and colleagues to be generous because of the knock-on effect that donations have on how much other people give.
Most people raising money by running in the London marathon will be relying on donations from their friends, family and colleagues. One question that Kimberley Scharf and I are looking at is how important the size of the person’s social group is – and whether you can be a successful fundraiser even if you have a relatively small social network. We capture the size of a fundraiser’s social network by the number of their Facebook friends. This may not be a perfect measure of the potential donor pool but many fundraisers do post to their Facebook pages. We find – perhaps surprisingly – that larger social networks do not translate into higher total amounts raised. Although fundraisers with more friends tend to get more donations, each donor in a large social network typically gives less, meaning that the total amount raised is roughly the same for those with a thousand-plus friends as it is for those with less than a hundred. This is true controlling for age and income and is also true for pages without a target.
There are a number of explanations for why this might be the case. One possibility is that, in a larger group of donors, each person’s donation matters less to the fundraiser and so the donors give less. It may also be the case that there are weaker relationships between the fundraiser and their friends in larger social networks. By digging further into the fundraising data, we hope to get a better understanding of the relationships between fundraisers and donors and provide further insights into what determines fundraising success.
Profits in schools – response
Author: Simon Burgess
Profits in schools – response
There were some interesting comments on the recent post I wrote on profit-making schools. This post offers a brief reply to those points.
First, one comment was that allowing profit-making is a solution to the lack of capital for schools:
“advocates see profit-making as a way to tap the private finance that might allow supply-side liberalisation, which would in turn allow choice to operate more effectively than it does at present. Theoretically, of course, this boost to capacity could be done with public finance. But it’s questionable whether the necessary level of spare capacity would be politically sustainable given all the other calls on public spending (especially now). So private finance is (arguably) one solution to that problem.”
It may be a solution to that problem, but it is not a necessary solution, there are other ways. The PFI programme has been funding capital spending on schools for over a decade now. Nor is it just a thing of the past: in 2011 Michael Gove announced capital expenditure through PFI of around £2bn to rebuild 300 schools. The latest estimates are that PFI expenditure on education will top £260m in 2012-13, and the whole programme has generated over £7bn for school building. The PFI obviously utilises the profit motive in the capital market to get funds into school building without needing profits in the schools themselves.
Second is the question of just how profits can be made. Given fixed revenue per student, it is not possible to directly make a greater rate of return by raising quality (the indirect route is discussed below). Profits can be made by reducing costs. This may be possible without reducing quality, or not. That possibility is that other agents can come in, re-arrange the budget, reduce costs and maintain quality by raising quality per pound spent. The comment was:
“You also argue that ‘outsiders’ are unlikely to know best how best to deploy their budgets. This seems like an odd argument. The market’s virtue is supposed to be innovation and the ability to scale good practice quickly through incentives to mimic the best. If you don’t think that works then I can’t see why you’d be interested in the practical aspects of for-profit schools, since there wouldn’t even be any benefits in principle.”
It is certainly true that schools are unlikely to be making completely optimal decisions. Our own work shows a huge degree of heterogeneity in schools’ financial decisions which is very unlikely all to be optimal. So they certainly have scope for learning. And schools may be able to learn from each other: a lot of people interpret the success of London schools as down to ‘London Challenge’ – and a lot of people interpret the success of that to collaboration, to learning from other schools. In fact, we are in the design stage of a large-scale RCT to test this out. But the key point is that with the current system for school revenue, allowing profit-making provides incentives to reduce costs but no direct incentive to raise quality. So again profits might be a way of encouraging collaboration, but there are other, easier, ways of doing the same thing.
The indirect channel for profit making to affect quality is a dynamic one. The third comment is:
“Presumably if you designed the admission and information systems properly then schools in which children make more progress will expand (either on site, or on another site) due to increased demand This could either come from parents choosing higher performing schools or commissioners awarding contracts/charters to higher performing schools. Then, assuming the school makes a fixed profit on each student they ‘process’, they will increase their profit through increased market share. Student progress up > Market share up > Profit up.”
The key here is the word “presumably”. Yes – this is the standard dynamic market process. If this worked in schools, then this would make choice and competition more effective in raising quality. But it does not appear to work well, as we described here. Understanding the best way to reform the revenue stream for schools to encourage expansion is the important part; profit-making may eventually be part of an incentive mechanism, but is currently tangential to the main problem.
I’m an economist, I believe that incentives matter hugely. Indeed, many of the things that I write or say to the Department for Education involve the phrase “you need to make it matter more”. But that is about individual incentives: perhaps making the pay of Headteachers contingent on school outcomes, perhaps introducing some form of performance incentive for teachers. These people can raise quality, and can be rewarded for doing so.
Within the present rules of the game, schools cannot be rewarded for raising quality, because the revenue they would receive is independent of quality. Clearly, profit-making schools can introduce individual performance incentives; but so can – and have – non-profit making schools. Again profit-making is a side issue. It’s the wrong battle to fight.
Money for Good?
Author: Sarah Smith
Money for Good?
On Thursday, New Philanthropy Capital published a new report, Money for Good UK, about why people give and what might be done to encourage them to give more. The very next day, the 25th Comic Relief raised a record-breaking £75 million for charity and in doing so, served to illustrate a number of the key themes from the report. One of the messages from the report is that around half of donors feel no underlying obligation (moral or otherwise) to give money to charity. 47 per cent of those asked (mainly people who had given money to charity in the previous year) agreed that people should donate money to charity if they have the means. But nearly the same number (44 per cent) agreed that people should not feel obliged to donate money to charity. Comic Relief is a testament to the efforts of literally thousands of people to persuade other people to give to good causes.
So, what does persuade people to give? The report found that the personal touch is important – whether personalized communications from charities that donors have relationships with or an approach from friends, family and colleagues – and perhaps the odd famous celebrity.
People also say they care about impact. When asked about what factors they pay attention to when they give to charity, the most important is how the organization will use their donation (with 63 per cent of donors pay close or extremely close attention) and evidence that the organization is having an impact (with 58 per cent paying close or extremely close attention. This mirrors similar findings from a recent survey done on Justgiving donors. It is certainly something that Comic Relief understands – interspersing the comedy with clips showing where the money is going and how it is going to be spent.
It is a commonly held view that giving isn’t a rational decision. Providing evidence that donors care about impact and evidence of impact is therefore important. And it helps charities and fundraisers think about what kind of messages they need to deliver. But, it needs probing a little further. What does impact mean to donors and what kind of evidence do they want? On one level, it is clear that donors don’t want their money to be wasted, but do they really want to be presented with detailed accounts or impact studies? The report is careful not to push this too far – they emphasize that few donors do detailed research before giving to charity. Indeed, one possible explanation for the importance of personal recommendations is that friends and family are effectively vouching for the quality of the charity and acting as a substitute for the donor’s own research.
Following the report, NPC have emphasized that charities need to do more to demonstrate impact. But, another important next step is to find out more about what kind of information donors want – and how they respond to messages about charity impact and different types of evidence. There has been some limited work in this area showing that donors respond better to simple messages about personal cases rather than detailed statistics. These findings come from simple field experiments in which donors are randomly given different information to test the effect of alternative messages. More worryingly, the experiments show that donations actually appear to decline if donors are given, alongside the personal cases of individuals who are going to be helped, statistical data about similar victims caught up in a larger pattern of illness, hunger or neglect. The authors of the research concluded that donors respond to real rather than statistical lives. So while it is important for charities to generate data about their impact, it would also be worth finding out how best to deliver effective messages about charity impact in ways that – like Comic Relief – elicit positive responses from donors.
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