When Top-Down Meets Bottom-Up: Legislative Signals and Online Crowdfunding

Over the last two decades, online crowdfunding platforms have facilitated fun- draising efforts to alleviate resource shortages across various sectors. As these platforms become increasingly important channels for bottom-up resource mobilization, it is essential to understand their vulnerability to shifts in public perception caused by top-down, off- platform events. In this paper, we examine the effect of an important top-down factor, leg- islative signals, on online giving behavior in the context of public education. We analyze how the ratification of the prominent Every Student Succeeds Act (ESSA) impacted donors' decisions on a leading education crowdfunding platform. Importantly, we examine the effects of the signal sent by the state ratification of the act itself rather than any effects derived from the actual implementation of the act. We compiled a multidimensional and granular data set on public schools and online charitable contributions. Detailed empirical analyses revealed a substantial shift in donation patterns and evidence of two contrasting donor tendencies. Although donors contributed more to local initiatives following the rati- fication, they contributed less to nonlocal initiatives, leading to a substantial net decline in the funds raised. We established two mechanisms through which these effects manifested: information push and information pull. Using both mechanisms, we show that donors who have a higher awareness of the legislative signal exhibit stronger shifts in donation behavior. Importantly, as a consequence of the shift in contributions to local initiatives, we find that schools with students of lower socioeconomic status (SES) experienced a sharper decline in the proportion of projects funded than schools with students of higher SES. Our work has important implications for platform designers, donor communities, public school administrators, teachers, and policymakers.