The United States is distinctive among Western countries in its reliance on nonprofit institutions to perform major social functions. This reliance is rooted in American history and is fostered by federal tax provisions for charitable giving. In this study, Charles T. Clotfelter demonstrates that changes in tax policy—effected through legislation or inflation—can have a significant impact on the level and composition of giving.

Clotfelter focuses on empirical analysis of the effects of tax policy on charitable giving in four major areas: individual contributions, volunteering, corporate giving, and charitable bequests. For each area, discussions of economic theory and relevant tax law precede a review of the data and methodology used in econometric studies of charitable giving. In addition, new econometric analyses are presented, as well as empirical data on the effect of taxes on foundations.

While taxes are not the most important determinant of contributions, the results of the analyses presented here suggest that charitable deductions, as well as tax rates and other aspects of the tax system, are significant factors in determining the size and distribution of charitable giving. This work is a model for policy-oriented research efforts, but it also supplies a major (and very timely) addition to the evidence that must inform future proposals for tax reform.

A formal model in the social sciences builds explanations when it structures the reasoning underlying a theoretical argument, opens venues for controlled experimentation, and can lead to hypotheses. Yet more importantly, models evaluate theory, build theory, and enhance conjectures. Formal Modeling in Social Science addresses the varied helpful roles of formal models and goes further to take up more fundamental considerations of epistemology and methodology.

The authors integrate the exposition of the epistemology and the methodology of modeling and argue that these two reinforce each other. They illustrate the process of designing an original model suited to the puzzle at hand, using multiple methods in diverse substantive areas of inquiry. The authors also emphasize the crucial, though underappreciated, role of a narrative in the progression from theory to model.

Transparency of assumptions and steps in a model means that any analyst will reach equivalent predictions whenever she replicates the argument. Hence, models enable theoretical replication, essential in the accumulation of knowledge. Formal Modeling in Social Science speaks to scholars in different career stages and disciplines and with varying expertise in modeling.