Essays on philanthropy

My thesis explores two aspects of philanthropy, the problem of asymmetric information between donors and the charities they support and corporate philanthropy in the Czech and Slovak Republics. The topics were inspired by real life problems observed in these countries, namely, the lack of trust in and information about nonprofit organizations and the need to inspire new, local donors to replace the disappearing foreign funding of nonprofit organizations.; The first two chapters of my thesis deal with the problem of asymmetric information that arises between donors and the charities they support. I focus on one particular solution to this problem, certification, a mechanism where an independent agency evaluates the charities that voluntarily apply for certification and pay a fee. The certificate serves as a signal of quality.; The first chapter, co-authored with Andreas Ortmann, addresses the question of a certifier's motivation and the welfare implications of this institution. We compare the behavior of a nonprofit and a for-profit certifier and analyze the welfare consequences in both cases. We observe that a profit-maximizing certifier is able to divert all funds from the charities to himself without providing any service to the market or increasing the welfare. The nonprofit certifier, on the other hand, increases welfare above the level observed in the market without certification.; The second chapter examines the impact of certification on the quality of charities in the market. I relax the major assumption from the previous model that quality of charities is exogenous by assuming that it is chosen by the managers who run the charities. The model shows that certification has the ability to increase the quality of the organizations in the market; the result, though, depends on the design of the system.; The third chapter is an empirical analysis of corporate philanthropy in the Czech Republic and Slovakia focused on understanding the corporate behavior and the motivation for giving. It is the first quantitative study of corporate charity in transition, analyzing data for 739 firms in the Czech Republic and 152 in Slovakia. In addition, it is the first study that distinguishes two distinct channels corporations use to support nonprofit organizations: sponsoring and giving. This enables the testing of a hypothesis that giving via different channels is motivated differently. I observe that there are significant differences between the two countries, particularly in giving. Corporate philanthropy is more established among firms in the Czech Republic, while in Slovakia it still remains predominantly the domain of foreign-owned, large companies operating at the international level. Importantly, the results fail to support the expectation of a strong negative impact on giving from the 2004 change in tax legislation in Slovakia, which abolished the tax deductibility of donations.