Entry and Exit in the Nonprofit Sector
AbstractWe study the entry and exit dynamics of nonprofit public charities using 1989-2003 tax return data. The observed patterns can be understood using a dynamic industry model based on Jovanovic (1982) that incorporates profit-deviation and a non-redistribution constraint. Both features generate a high exit threshold which implies high net entry rates and low exit rates. The data reveal that nonprofit gross entry rates are lower than those of for-profits in services, while extremely low exit rates (across both sectors and time) result in net entry rates nearly 3 times larger than that of for-profit firms. We find that the behavior of new public charities is remarkably similar to that found in studies of private firms (e.g. new firms begin smaller than the industry mean, but grow faster). However, exit patterns diverge sharply. Besides relatively low exit rates, the survival rate of new nonprofit firms greatly exceeds those found in studies on services and manufacturing. In addition we find that the hazard rate of exit declines with age and size, and with size conditional on age.
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Bibliographic InfoArticle provided by De Gruyter in its journal The B.E. Journal of Economic Analysis & Policy.
Volume (Year): 8 (2008)
Issue (Month): 1 (July)
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Web page: http://www.degruyter.com
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- Peter Nunnenkamp & Hannes Öhler & Tillmann Schwörer, 2011.
"US based NGOs in International Development Cooperation: Survival of the Fittest?,"
Courant Research Centre: Poverty, Equity and Growth - Discussion Papers
83, Courant Research Centre PEG.
- Peter Nunnenkamp & Hannes Öhler & Tillmann Schwörer, 2011. "US based NGOs in International Development Cooperation: Survival of the Fittest?," DEGIT Conference Papers c016_046, DEGIT, Dynamics, Economic Growth, and International Trade.
- Peter Nunnenkamp & Hannes Öhler & Tillmann Schwörer, 2011. "US based NGOs in International Development Cooperation: Survival of the Fittest?," Kiel Working Papers 1717, Kiel Institute for the World Economy.
- Peter G. Backus, 2012. "Gibrat’s law and legacy for non-profit organisations: a non-parametric analysis," Working Papers 2012/8, Institut d'Economia de Barcelona (IEB).
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