Government or charity? Preferences for welfare provision by ethnicity

•I examine the role of ethnicity in preferences for giving to charity and government.•A real donation experiment is applied to investigate giving preferences.•Giving depends not only on organisation type but also on recipient ethnicity.•Giving is higher for charity than government when the beneficiary is a minority.•Perceptions of organisational efficiency also affect giving decisions.

There is debate about whether charity or government is better for alleviating poverty. While in many cases government agencies and private charity serve similar purposes, they can be perceived very differently by the public. This is particularly true for issues such as minority welfare where government spending has been historically ineffective. This paper investigates the role of recipient ethnicity in preferences for giving to private charity and government agencies. I present a real donation experiment where donors can donate to government organisations and private charities assisting a population in general, or assisting a particular ethnic group in that population. I find that giving depends not only on the organisation type but also the ethnicity of the beneficiary. Perceptions of organisational effectiveness are also found to affect giving. The findings of the experiment suggest that if the government is unable to improve outcomes it may need to consider outsourcing to private charity.