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Thanks for Nothing? Not-for-Profits and Motivated Agents

  • Ghatak, Maitreesh
  • Mueller, Hannes Felix

We re-examine the labor donation theory of not-for-profits and show that these organizations may exist not necessarily because motivated workers prefer to work in them, or that they dominate for-profits in terms of welfare, but because the excess supply of motivated workers makes the non-profit form more attractive to managers. We show that if firms had to compete for motivated workers then not-for-profit firms would be competed out by for-profit firms. Therefore, the choice between not-for-profit and for-profit provision is not always a question of resolving incentive problems but also one of distribution of rents between management and workers, and consequently, the relative scarcity of workers plays an important role in this choice.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 7663.

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Date of creation: Jan 2010
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Handle: RePEc:cpr:ceprdp:7663
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  18. Fama, Eugene F & Jensen, Michael C, 1983. "Agency Problems and Residual Claims," Journal of Law and Economics, University of Chicago Press, vol. 26(2), pages 327-49, June.
  19. Paul Gregg & Paul A. Grout & Anita Ratcliffe & Sarah Smith & Frank Windmeijer, 2008. "How important is pro-social behaviour in the delivery of public services?," The Centre for Market and Public Organisation 08/197, Department of Economics, University of Bristol, UK.
  20. 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.
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