A large literature examines the interaction of private and public funding of charities, much of it testing if public funding crowds out private funding. In this paper I look for two alternative phenomena using a large panel data set gathered from nonprofit organizations' tax returns. First, I look for crowding out in the opposite direction: increased private funding may cause reduced public funding. Second, I test whether one type of funding acts as a signal of charity quality and thus crowds in other funding. I find evidence that government grants crowd in private donations. Crowding in is larger for younger charities. This is consistent with signaling, if donors know less about younger charities and the signal value is stronger. I find no evidence of an effect of private donations on government grants.
Heutel, Garth, "Crowding Out and Crowding In of Private Donations and Government Grants" (2012). Economics Faculty Publications. 13.