Intermediation by aid agencies
This paper models aid agencies as financial intermediaries that do not make a financial return to depositors, whose concern is to transfer resources to investor-beneficiaries. This leads to a problem of verifying that the agency is using donations as intended. One solution to this problem is for an agency to employ altruistic workers at below-market wages: altruistic workers, who can monitor the agency's activities, would not work at below-market rates unless it were genuinely transferring resources to beneficiaries. We consider conditions for this solution to be incentive compatible. In a model with pure moral hazard, observability of wages makes incorporation as a not-for-profit firm redundant as a commitment device. In a model with both moral hazard and adverse selection, incorporation as a not-for-profit firm can serve as a costly commitment mechanism reassuring donors against misuse of their funds. Hiring a worker of low ability can also be a valuable commitment device against fraud.
|Date of creation:||Nov 2005|
|Date of revision:|
|Contact details of provider:|| Postal: |
Web page: http://www.economics.bham.ac.uk
More information through EDIRC
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.:
- Patrick Francois, 2003.
"Not-For-Profit Provision of Public Services,"
Royal Economic Society, vol. 113(486), pages C53-C61, March.
- Glaeser, Edward L. & Shleifer, Andrei, 2001.
Journal of Public Economics,
Elsevier, vol. 81(1), pages 99-115, July.
- Edward L. Glaeser & Andrei Shleifer, 1998. "Not-For-Profit Entrepreneurs," Harvard Institute of Economic Research Working Papers 1852, Harvard - Institute of Economic Research.
- Edward L. Glaeser & Andrei Shleifer, 1998. "Not-For-Profit Entrepreneurs," NBER Working Papers 6810, National Bureau of Economic Research, Inc.
- Besley, Timothy J. & Ghatak, Maitreesh, 2004.
"Competition and Incentives with Motivated Agents,"
CEPR Discussion Papers
4641, C.E.P.R. Discussion Papers.
- Timothy Besley & Maitreesh Ghatak, 2003. "Competition and incentives with motivated agents," LSE Research Online Documents on Economics 2202, London School of Economics and Political Science, LSE Library.
- Tim Besley & Maitreesh Ghatak, 2005. "Competition and incentives with motivated agents," LSE Research Online Documents on Economics 928, London School of Economics and Political Science, LSE Library.
- Myerson, Roger B., 1982. "Optimal coordination mechanisms in generalized principal-agent problems," Journal of Mathematical Economics, Elsevier, vol. 10(1), pages 67-81, June.
- Milgrom, Paul & Roberts, John, 1986.
"Price and Advertising Signals of Product Quality,"
Journal of Political Economy,
University of Chicago Press, vol. 94(4), pages 796-821, August.
- H. Naci Mocan & Erdal Tekin, 2000.
"Nonprofit Sector and Part-Time Work: An Analysis of Employer-Employee Matched Data of Child Care Workers,"
NBER Working Papers
7977, National Bureau of Economic Research, Inc.
- H. Naci Mocan & Erdal Tekin, 2003. "Nonprofit Sector and Part-Time Work: An Analysis of Employer-Employee Matched Data on Child Care Workers," The Review of Economics and Statistics, MIT Press, vol. 85(1), pages 38-50, February.
- Mocan, Naci & Tekin, Erdal, 2001. "Nonprofit Sector and Part-Time Work: An Analysis of Employer-Employee Matched Data of Child Care Workers," IZA Discussion Papers 408, Institute for the Study of Labor (IZA).
- Christopher Ruhm & Carey Borkoski, 2000.
"Compensation in the Nonprofit Sector,"
NBER Working Papers
7562, National Bureau of Economic Research, Inc.
- Reinikka, Ritva & Svensson, Jakob, 2004. "Working for God?," CEPR Discussion Papers 4214, C.E.P.R. Discussion Papers.
- William Easterly, 2003. "Can Foreign Aid Buy Growth?," Journal of Economic Perspectives, American Economic Association, vol. 17(3), pages 23-48, Summer.
- 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.
- Maggi G. & Rodriguez-Clare A., 1995. "On Countervailing Incentives," Journal of Economic Theory, Elsevier, vol. 66(1), pages 238-263, June.
- Armstrong, Mark & Rochet, Jean-Charles, 1999. "Multi-dimensional screening:: A user's guide," European Economic Review, Elsevier, vol. 43(4-6), pages 959-979, April.
- Preston, Anne E, 1989. "The Nonprofit Worker in a For-Profit World," Journal of Labor Economics, University of Chicago Press, vol. 7(4), pages 438-63, October.
When requesting a correction, please mention this item's handle: RePEc:bir:birmec:05-16. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Colin Rowat)
If references are entirely missing, you can add them using this form.