Abstract
This study investigates (i) whether an increase in donations in the aftermath of disasters can mitigate the negative effects on subjective well-being (SWB), and if so, (ii) whether policy measures, such as tax law changes, can amplify this mitigating effect by providing further incentives for donations. To analyze these questions, we use data on the recent, impactful triple disaster on March 11, 2011 in Japan (3–11). Coincidentally, only three months after the disaster, a long-planned change in tax law was put into effect that allows higher tax deductions for charitable donations. Applying a moderated mediation analysis to a unique dataset, we are able to disentangle the total rise of donations into positive effects that are caused by the disaster itself and positive effects that are caused by the recent change in the Japanese tax law. The results of our study are as follows: First, we show that about 30% of the direct negative effect of 3–11 on SWB is mediated and mitigated by donations. Second, we show that the change in taxation law could have further mitigated the negative SWB effects of 3–11, if more people had been aware of it. However, since a large majority of the Japanese public had not even been aware of the tax law change, potential mitigating effects by increased donations have not been realized. As for policy implications, our results show that governments can create incentives for donations that not only support disaster reconstruction, but also mitigate the negative SWB effects of disasters
. Introduction
This study sets out to investigate (i) whether an increase in donations in the aftermath of disasters can mitigate the negative effects on subjective well-being (SWB), and if so, (ii) whether policy measures, such as tax law changes, can amplify this mitigating effect by providing further incentives for donations.
The two research questions are derived by bringing together different strands of literature on the intertwined relationship between disasters, donations, SWB, and tax subsidies regarding donations.
Although several studies have provided evidence for negative SWB effects of disasters (Kimball et al., 2006 and Metcalfe et al., 2011) as well as for positive SWB effects of donations (Aknin et al., 2013 and Dunn et al., 2014), those findings have not yet been analyzed together. Empirical evidence of an increase in charitable donations after disasters (Brown, Harris, & Taylor, 2012) provides a strong rationale for looking at both effects in connection. That is, there are both positive and negative effects of disasters in the form of a negative direct effect on SWB, a positive direct effect on donations, and a positive indirect effect on SWB via donations. In other words, disasters entail not only negative but also positive effects on SWB through an increase in pro-social activities, such as donations. However, by omitting donations in SWB equations, existing studies have systematically underestimated the direct negative SWB effect of disasters.
In order to correct for this bias and fill the gap in the literature, we analyze the SWB effects of a recent, impactful disaster: the triple disaster that occurred on March 11, 2011 in Japan (3–11). The initial disaster, known as the Great East Japan Earthquake, triggered a large-scale tsunami causing more than 15,000 causalities, which in turn triggered the meltdown of the Fukushima Daiichi Nuclear Power Plant ( Okada, Ye, Kajitani, Shi, & Tatano, 2011).
As a second contribution to the literature, we account for a recent change in Japanese tax law, allowing higher tax deductions for charitable donations. While several studies have provided mixed findings regarding the effect of tax law changes on charitable donations (see Adena, 2014 for a review of the literature), the effect of tax law changes in the aftermath of disasters has not yet been explored.
Applying a moderated mediation analysis using a unique dataset, we are able to disentangle the total rise of donations into positive effects caused by the disaster itself, and positive effects caused by the recent change in the Japanese tax law.
The results of our study are as follows: First, we show that about 30% of the direct negative effect of 3–11 on SWB is mediated and mitigated by donations. Second, we show that the change in taxation law could have further mitigated the negative SWB effects of 3–11, if more people had been aware of it. However, since a large majority of the Japanese public had not even been aware of the tax law change, potential mitigating effects by increased donations have not been realized.
As for policy implications, our results show that governments can create incentives for donations that not only support disaster reconstruction, but also mitigate the negative SWB effects of disasters. However, if they do so, policymakers are advised to follow the motto “do good and talk about it.” Without effectively communicating new incentive schemes to the public, they might not be worth the effort in the first place.
7. Conclusion
This is the first study to analyze the relationships between disasters, donations, tax law changes, and SWB together, decomposing the total SWB effect of disasters into direct and indirect components, and accounting for the moderating role of tax law change awareness in the relationship between disaster occurrence and donation behavior. Thus, it fills an important gap in the literature, and at the same time, sheds new light on the debate regarding the effects of 3–11 on SWB in Japan. Our findings are as follows. First, we show that donations mediate and mitigate about 30% of the direct negative effect of 3–11 on SWB. Second, we show that the change in taxation law could have further mitigated the negative SWB effects of 3–11 if more people had been aware of it. Based on our findings, we argue for incentivizing private donations in the aftermath of disasters.
