We use data from the Multi-City Study of Urban Inequality (MCSUI) employer survey to document a new empirical finding that workers are less likely to receive promotions in nonprofit firms than in for-profit firms. We propose an incentives-based explanation for this result and offer empirical evidence that is consistent with our hypothesis. At the heart of our explanation is a tradeoff between the incentive-provision and job-assignment roles of promotions. While for-profit firms must rely on promotions to serve both purposes, presumably achieving neither perfectly, we argue that nonprofits have the luxury of using promotions predominantly to achieve optimal job assignment. We conjecture that incentive creation may be less of a concern in nonprofit firms, where workers self-select and are often intrinsically motivated by interest in the firm’s output, thus allowing promotions to be used mainly to achieve efficient job assignments.
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Paper provided by EconWPA in its series Labor and Demography with number
0501010.
References listed on IDEAS Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
Holtmann, A G, 1983.
"A Theory of Non-Profit Firms,"
Economica,
London School of Economics and Political Science, vol. 50(200), pages 439-49, November.
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