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Compensation in the Nonprofit Sector


  • Christopher J. Ruhm
  • Carey Borkoski


We investigate the determinants of pay in the nonprofit sector using data for 25–55 year olds from the 1994– 88 Current Population Survey Outgoing Rotation Groups. Our results are consistent with the hypothesis that compensation is primarily determined in competitive markets without ‘‘labor donations’ ’ to nonprofit employers. One implication is that nonprofit workers receive virtually the same wages as observationally equivalent employees in similar positions with profit-seeking enterprises. We cannot rule out the possibility of nonprofit penalties or premiums for selected groups; however, the differentials are generally small and competition appears to play a dominant role in nonprofit wage setting.

Suggested Citation

  • Christopher J. Ruhm & Carey Borkoski, 2003. "Compensation in the Nonprofit Sector," Journal of Human Resources, University of Wisconsin Press, vol. 38(4).
  • Handle: RePEc:uwp:jhriss:v:38:y:2003:i:4:p992-1021

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    References listed on IDEAS

    1. Joyce R. Shackett & John M. Trapani, 1987. "Earnings Differentials and Market Structure," Journal of Human Resources, University of Wisconsin Press, vol. 22(4), pages 518-531.
    2. Preston, Anne E, 1988. "The Effects of Property Rights on Labor Costs of Nonprofit Firms: An Application to the Day Care Industry," Journal of Industrial Economics, Wiley Blackwell, vol. 36(3), pages 337-350, March.
    3. Frech, H E, III, 1976. "The Property Rights Theory of the Firm: Empirical Results from a Natural Experiment," Journal of Political Economy, University of Chicago Press, vol. 84(1), pages 143-152, February.
    4. Macpherson, David A & Hirsch, Barry T, 1995. "Wages and Gender Composition: Why Do Women's Jobs Pay Less?," Journal of Labor Economics, University of Chicago Press, vol. 13(3), pages 426-471, July.
    5. Roomkin, Myron J & Weisbrod, Burton A, 1999. "Managerial Compensation and Incentives in For-Profit and Nonprofit Hospitals," Journal of Law, Economics, and Organization, Oxford University Press, vol. 15(3), pages 750-781, October.
    6. A. G. Holtmann & Todd L. Idson, 1993. "Wage Determination of Registered Nurses in Proprietary and Nonprofit Nursing Homes," Journal of Human Resources, University of Wisconsin Press, vol. 28(1), pages 55-79.
    7. Susan Rose-Ackerman, 1996. "Altruism, Nonprofits, and Economic Theory," Journal of Economic Literature, American Economic Association, vol. 34(2), pages 701-728, June.
    8. Handy, Femida & Katz, Eliakim, 1998. "The Wage Differential between Nonprofit Institutions and Corporations: Getting More by Paying Less?," Journal of Comparative Economics, Elsevier, vol. 26(2), pages 246-261, June.
    9. Leete, Laura, 2001. "Whither the Nonprofit Wage Differential? Estimates from the 1990 Census," Journal of Labor Economics, University of Chicago Press, vol. 19(1), pages 136-170, January.
    10. George J. Borjas & H. E. Frech III & Paul B. Ginsburg, 1983. "Property Rights and Wages: The Case of Nursing Homes," Journal of Human Resources, University of Wisconsin Press, vol. 18(2), pages 231-246.
    11. Goddeeris, John H, 1988. "Compensating Differentials and Self-selection: An Application to Lawyers," Journal of Political Economy, University of Chicago Press, vol. 96(2), pages 411-428, April.
    12. Barbara R. Bergmann, 1974. "Occupational Segregation, Wages and Profits When Employers Discriminate by Race or Sex," Eastern Economic Journal, Eastern Economic Association, vol. 1(2), pages 103-110, April.
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    JEL classification:

    • J3 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs
    • J4 - Labor and Demographic Economics - - Particular Labor Markets


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