Nonprofit organizations and the macroeconomy

This chapter explores interactions between aggregate economic variables (including income, GDP, wealth, economic growth rates, and income inequality) and the nonprofit sector (including revenues, costs, expenditures, entry, and exit). Nonprofit organizations probably affect macroeconomic variables, but very little is known about the size and direction of such effects. The largest problem in existing studies is that they do not clearly state their counterfactual assumptions about how other institutions would react to a reduction in the nonprofit role. More is known about the effect of the macroeconomy on the density and economic impact of nonprofits. Revenues and expenditures follow the business cycle, but the need for nonprofit services in some subsectors runs counter to the business cycle. This mismatch causes higher costs and service gaps, but is inherent in regulations, donor responses, and current nonprofit managerial cultures.