Matching profit and Non-profit Needs: How NPOs and Cooperative Contribute to Growth in Time of Crisis. A Quantitative Approach

We propose a microeconomic model aimed at describing, in a dual production process, the interaction between the formal and the informal sector. The adopted framework is characterized by the absence of information asymmetries. The latter assumption is motivated by the focus of the paper, which chooses a cooperative rather than a competitive interaction between the for-profit and not for profit sectors, as the non-profit sector offers services which enable and increase the labour productivity of the workers employed in the for profit sector. Specifically, the non-profit industry can lower the monetary costs of labour by paying a share of wages and dividends in real terms. As a result, at aggregate level, consumption expenditure decreases proportionally to the share of goods and services that are not bought on the market. In this scenario the non-profit sector can play an important role in elaborating a way out of the crisis, by: i) reducing the income inequality between the employed and the unemployed, ii) lowering labour costs, and iii) endowing workers with an alternative source of employment. The theoretical analysis, complemented by empirical evidence built on Italian data collected for the period 2005–2012, shows that the model is not yet applicable in the Italian context as the non-profit industry is growing, but it is still inadequate in size to complement the activities of the for profit sector. However, we claim that Italy should elaborate a way out of the crisis by empowering the Third Sector, and, more in general, a good informal economy made of non-profit institutions.