Do non-profits make a difference? Evaluating non-profit vis-à-vis for-profit organisations in social services

This CPB Document provides a framework for the evaluation of non-profit organisations. This framework addresses the question under which conditions, and, if so, in what way non-profits should be stimulated. Essentially, in order to answer these questions, three steps can be followed: (i) identifying potentially relevant market failures that non-profits may aim to diminish; (ii) linking market failures to observed performance indicators for profits and non-profits; and (iii) use these insights to derive policy implications: should non-profits be stimulated? We apply the proposed framework to three sectors that are commonly labelled as 'social services': the care sector, the childcare sector and welfare-to-work services. All these sectors are subject to substantial informational problems regarding the quality of services. When surveying the literature, we find non-profit organisations only to make a difference in some specific cases. So far, there is no strong evidence that can be used as an argument to stimulate non-profit organisations in mixed markets. Moreover, such (targeted) policies may discourage donated labour and private donations, thus rendering them largely ineffective.