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The dark side of transparency: mission variety and industry equilibrium in decentralised public good provision

Author

Listed:
  • Gani Aldashev

    (ULB - Université libre de Bruxelles, ECARES - European Center for Advanced Research in Economics and Statistics - ULB - Université libre de Bruxelles)

  • Esteban Jaimovich

    (UNIS - University of Surrey)

  • Thierry Verdier

    (PSE - Paris School of Economics - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - EHESS - École des hautes études en sciences sociales - ENPC - École nationale des ponts et chaussées - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement, PJSE - Paris Jourdan Sciences Economiques - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - EHESS - École des hautes études en sciences sociales - ENPC - École nationale des ponts et chaussées - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement)

Abstract

We study the implications of transparency policies on decentralised public good provision by the non-profit sector. We present a model where imperfect monitoring of the use of funds interacts with the competitive structure of the non-profit sector under alternative informational regimes. Increasing transparency regarding the use of funds may have ambiguous effects on total public good provision and on donors' welfare. On the one hand, transparency encourages all non-profit firms to engage more actively in curbing fund diversion. On the other hand, it tilts the playing field against non-profits facing higher monitoring costs, pressing them to give up on their missions. This effect on the extensive margin implies that transparency policies lead to a reduction in the diversity of social missions addressed by the non-profit sector. We show that the negative impact of transparency on social mission variety and on donors' welfare is highest for intermediate levels of asymmetry in monitoring costs.

Suggested Citation

  • Gani Aldashev & Esteban Jaimovich & Thierry Verdier, 2023. "The dark side of transparency: mission variety and industry equilibrium in decentralised public good provision," Post-Print halshs-04205774, HAL.
    • Handle: RePEc:hal:journl:halshs-04205774
    DOI: 10.1093/ej/uead036
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    Cited by:

    1. Kopel, Michael & Marini, Marco A., 2022. "Mandatory disclosure of managerial contracts in NGOs," Journal of Economic Behavior & Organization, Elsevier, vol. 199(C), pages 65-85.
    2. Kopel, Michael & Marini, Marco A., "undated". "Mandatory Disclosure of Managerial Contracts in Nonprofit Organizations," 2030 Agenda 308022, Fondazione Eni Enrico Mattei (FEEM).
    3. Ester Manna, 2023. "Bad NGOs? Competition in the market for donations and workers' misconduct," UB School of Economics Working Papers 2023/457, University of Barcelona School of Economics.

    More about this item

    JEL classification:

    • L31 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Nonprofit Institutions; NGOs; Social Entrepreneurship
    • D64 - Microeconomics - - Welfare Economics - - - Altruism; Philanthropy; Intergenerational Transfers
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights

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