Why do people favor informal giving?

: the effect of social pressure, efficiency concerns and social norms : evidence from Zakat in Yemen

Abstract

Social ties play a crucial role on informal giving, which includes giving to friends, family, or neighbors, but the actual reasons why individuals are more generous towards socially close people are still to be investigated. Using data from Zakat, a religious obligation of Islam in Yemen, this thesis aims to identify how social pressure, efficiency concerns and social norms impact the probability and the amount of donating Zakat to family, friends, and neighbors. We confirm the importance of this group of recipients, with around half of the givers donating, onaverage, 42% of their Zakat to family, friends, and neighbors. While wealth is the most important economic resource to make households more prone to give to socially close people, income seems the most important resource when it comes to the amount given. We found that the wish to control the use of their gift is the only relevant channel for the probability of giving to this group of people, as when the efficiency concerns index increases by one unit, the probability of a household to give Zakat to family, friends and neighbors increases by 10.3 percentual points. None of the channels considered impact the amount of Zakat given to family, friends, and neighbors. Additionally, we find that givers give less Zakat than the social norm demands and that, while social pressure increases the probability of giving Zakat to institutions, the opposite happens for social norms and efficiency concerns. None of these channels impact the amount of Zakat given to institutions.

Date of Award	25 Jan 2022
Original language	English
Awarding Institution	Universidade Católica Portuguesa
Supervisor	Anna Bernard (Supervisor)