'Making a Difference': Labor Donations in the Production of Public Goods
Despite the potential for free-riding, workers motivated by 'making a difference' to the mission or output of an establishment may donate labor to it. When the establishment uses performance related compensation (PRC), these labor donations closely resemble a standard private provision of public goods problem. When PRC is not used, the establishment will favor setting low wages. High wages can induce an adverse selection problem; individuals without concern for the mission or output, take the job and knowingly underperform because they will not be financially penalized. Low wages help to select a labor force driven by concern for the firm's output. Without PRC the problem differs significantly from a standard private provision of public goods situation: there need not be free-riding, contributions are non-monotonic in valuations, and contribution incentives are significant even in large populations. Even when an establishment is able to introduce perfect PRC, it may choose not to, as its impact on output may be negligible. It thus explains why firms producing public goods, or output that tends to be socially valued, may choose both low compensation, and payment that is not related to performance.
|Date of creation:||Jan 2004|
|Contact details of provider:|| Postal: 2 Priory Road, Bristol, BS8 1TX|
Phone: 0117 33 10799
Fax: 0117 33 10705
Web page: http://www.bris.ac.uk/cmpo/
More information through EDIRC
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.:
- 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.
- Carol Propper & Deborah Wilson, 2003. "The Use and Usefulness of Performance Measures in the Public Sector," Oxford Review of Economic Policy, Oxford University Press, vol. 19(2), pages 250-267, Summer.
- Francois, Patrick, 2000. "'Public service motivation' as an argument for government provision," Journal of Public Economics, Elsevier, vol. 78(3), pages 275-299, November.
- David Lewin, 2003. "Incentive Compensation in The Public Sector: Evidence and Potential," Journal of Labor Research, Transaction Publishers, vol. 24(4), pages 597-619, October.
- repec:rus:hseeco:124059 is not listed on IDEAS
- Duncan, Brian, 1999. "Modeling charitable contributions of time and money," Journal of Public Economics, Elsevier, vol. 72(2), pages 213-242, May.
- Simon Burgess & Marisa Ratto, 2003. "The Role of Incentives in the Public Sector: Issues and Evidence," Oxford Review of Economic Policy, Oxford University Press, vol. 19(2), pages 285-300, Summer.
- Christopher J. Ruhm & Carey Borkoski, 2003.
"Compensation in the Nonprofit Sector,"
Journal of Human Resources,
University of Wisconsin Press, vol. 38(4).
- Christopher Ruhm & Carey Borkoski, 2000. "Compensation in the Nonprofit Sector," NBER Working Papers 7562, National Bureau of Economic Research, Inc.
- repec:rus:hseeco:122160 is not listed on IDEAS
- Vicary, Simon, 2000. "Donations to a public good in a large economy," European Economic Review, Elsevier, vol. 44(3), pages 609-618, March.
- 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.
- 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.
- 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).
- Patrick Francois, 2003. "Not-For-Profit Provision of Public Services," Economic Journal, Royal Economic Society, vol. 113(486), pages 53-61, March.
- 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.
- Corneo, Giacomo & Rob, Rafael, 2003. "Working in public and private firms," Journal of Public Economics, Elsevier, vol. 87(7-8), pages 1335-1352, August.
- Giacomo Corneo & Rafael Rob, "undated". "Working in Public and Private Firms," Penn CARESS Working Papers 7942b6b570793de0891a05acb, Penn Economics Department.
- Corneo, Giacomo & Rob, Rafael, 2001. "Working in Public and Private Firms," CEPR Discussion Papers 2719, C.E.P.R. Discussion Papers.
- Andreoni, James, 1990. "Impure Altruism and Donations to Public Goods: A Theory of Warm-Glow Giving?," Economic Journal, Royal Economic Society, vol. 100(401), pages 464-477, June.
- Malcomson, James M., 1999. "Individual employment contracts," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 35, pages 2291-2372 Elsevier.
- Malcomson, J., 1998. "Individual employment contracts," Discussion Paper Series In Economics And Econometrics 9804, Economics Division, School of Social Sciences, University of Southampton.
- Duncan Boldy, 1999. "Contribution," World Scientific Book Chapters, in: Monitoring, Evaluating, Planning Health Services, chapter 25, pages 261-262 World Scientific Publishing Co. Pte. Ltd..
- Bernheim, B Douglas & Whinston, Michael D, 1986. "Common Agency," Econometrica, Econometric Society, vol. 54(4), pages 923-942, July.
- Menchik, Paul L. & Weisbrod, Burton A., 1987. "Volunteer labor supply," Journal of Public Economics, Elsevier, vol. 32(2), pages 159-183, March.
- 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.
- Preston, Anne E, 1989. "The Nonprofit Worker in a For-Profit World," Journal of Labor Economics, University of Chicago Press, vol. 7(4), pages 438-463, October. Full references (including those not matched with items on IDEAS)
When requesting a correction, please mention this item's handle: RePEc:bri:cmpowp:04/093. 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: ()
If references are entirely missing, you can add them using this form.