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An Experimental Study for Environmental Fundraising in Majorca, Spain

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Type: Working Paper
Author: López, Maria Claudia; Blanco, Esther; Coleman, Eric A.
Date: 2010
Agency:
Series:
URI: http://hdl.handle.net/10535/7503
Sector: New Commons
Region: Europe
Subject(s): environment
tourism
experimental economics
crowding
Abstract: "This paper tests the effectiveness of different institutions to fundraise for environmental projects at tourist destinations. We conduct a series of experiments with tourists visiting the Island of Majorca, Spain, and test the fundraising capacity of a voluntary donation scheme, two tax levels, and a matching instrument. Majorca is a major international tourism destination, but tourism activities continue to stress the natural environment making the destination less attractive. This is a common phenomenon in mature tourism destinations. In response, many destinations invest in projects to prevent environmental degradation or for environmental remediation. These projects are traditionally financed by means of public investment, with a consequent tax burden to residents. The most common alternative to fund environmental projects is shifting the tax burden to tourists through tourist-targeted taxation schemes. More recently, programs to gather voluntary donations from tourists have been implemented. In one treatment of our experiment, tourists are given the opportunity to make a voluntary donation to the local environmental organization involved in such projects. In high tax and low tax treatment, tourists are taxed some proportion of their initial endowment and then decide on their level of voluntary contributions from their remaining endowment. In a final treatment, the experimenters match, one-for-one, any voluntary donations. We test the crowding-out hypothesis of taxes over voluntary environmental donations and find imperfect crowding-out (from 60 to 65 percent for different tax levels). Finally, we explore potential crowding-in of matching instruments (widely used in non-tourism settings for fundraising campaigns), but do not find any support for the capacity of matching contributions to increase the level of donations. Because of imperfect crowding-out it may be reasonable to use voluntary donation programs and tourism taxes complementarily (instead of independently, as has been done in Majorca), to increase fundraising for environmental purposes."

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