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Thanks for nothing? Not-for-profits and motivated agents

  • Ghatak, Maitreesh
  • Mueller, Hannes

We re-examine the labor donation theory of not-for-profits and show that these organizations may exist not necessarily because motivated workers prefer to work in them, or that they dominate for-profits in terms of welfare, but because the excess supply of motivated workers makes the non-profit form more attractive to managers. We show that if firms had to compete for motivated workers then not-for-profit firms would be competed out by for-profit firms. Therefore, in the choice between not-for-profit and for-profit provision, other than incentive problems, the distribution of rents between management and workers, and consequently, the relative scarcity of motivated workers may play an important role.

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Article provided by Elsevier in its journal Journal of Public Economics.

Volume (Year): 95 (2011)
Issue (Month): 1 ()
Pages: 94-105

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Handle: RePEc:eee:pubeco:v:95:y:2011:i:1:p:94-105
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  19. Susan Rose-Ackerman, 1996. "Altruism, Nonprofits, and Economic Theory," Journal of Economic Literature, American Economic Association, vol. 34(2), pages 701-728, June.
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