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Workers’ Motivation and Quality of Services in Mission-Driven Sectors

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  • Francesca Barigozzi
  • Chiara Canta
  • Helmuth Cremer

Abstract

This paper studies how firms’ ownership choices and workers’ intrinsic motivation jointly shape service quality and market outcomes in labor-intensive, mission-driven sectors. Two organizations first choose whether to operate as standard for-profit or as mission-oriented firms, and then compete in both the labor and the user markets. Mission-oriented firms have higher unit costs but attract better-motivated workers. Service quality is endogenously determined through the sorting of intrinsically motivated workers and depends on the firm's ownership type. We show that all market structures - standard, mission-oriented, or mixed - can arise in equilibrium, and that mixed structures can be Pareto superior by efficiently allocating the most motivated workers to the mission-oriented firm while preserving the cost advantage of the other firm. While equilibrium outcomes generally diverge from the social optimum due to externalities and lack of coordination, they are both driven by the trade-off between cost-efficiency and motivation. The model helps explain the coexistence of heterogeneous ownership structures observed in some sectors - such as the nursing homes sector - and identifies conditions under which such diversity is welfare-enhancing.

Suggested Citation

  • Francesca Barigozzi & Chiara Canta & Helmuth Cremer, 2025. "Workers’ Motivation and Quality of Services in Mission-Driven Sectors," CESifo Working Paper Series 12011, CESifo.
    • Handle: RePEc:ces:ceswps:_12011
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    References listed on IDEAS

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    1. David P. Baron, 2001. "Private Politics, Corporate Social Responsibility, and Integrated Strategy," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 10(1), pages 7-45, March.
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    Keywords

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    JEL classification:

    • J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L31 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Nonprofit Institutions; NGOs; Social Entrepreneurship

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