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Small is Beautiful: Motivational Allocation in the Nonprofit Sector

Author

Listed:
  • Gani Aldashev

    (ULB - Université libre de Bruxelles)

  • Esteban Jaimovich

    (UNIS - University of Surrey)

  • Thierry Verdier

    (CEPR - Center for Economic Policy Research - CEPR, 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 des Ponts ParisTech - 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 des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement, PUC RIO - PUC RIO)

Abstract

We build an occupational-choice general-equilibrium model with for-profit firms, nonprofit organizations, and endogenous private warm-glow donations. Lack of monitoring on the use of funds implies that an increase of funds of the nonprofit sector (because of a higher income in the for-profit sector, a stronger preference for giving, or an inflow of foreign aid) worsens the motivational composition and performance of the nonprofit sector. We also analyze the conditions under which donors (through linking donations to the motivational composition of the nonprofit sector), nonprofits themselves (through peer monitoring), or the government (using a tax-financed public funding of nonprofits) can eliminate the low-effectiveness equilibrium. We present supporting case-study evidence from developing-country nongovernmental organization sector and humanitarian emergencies.

Suggested Citation

  • Gani Aldashev & Esteban Jaimovich & Thierry Verdier, 2017. "Small is Beautiful: Motivational Allocation in the Nonprofit Sector," PSE-Ecole d'économie de Paris (Postprint) halshs-01887092, HAL.
    • Handle: RePEc:hal:pseptp:halshs-01887092
    DOI: 10.1093/jeea/jvx024
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    Cited by:

    1. Gani Aldashev & Marco Marini & Thierry Verdier, 2017. "Samaritan Bundles: Inefficient Clustering in NGO Projects," Working Papers 6/17, Sapienza University of Rome, DISS.
    2. Dur, Robert & van Lent, Max, 2018. "Serving the public interest in several ways: Theory and empirics," Labour Economics, Elsevier, vol. 51(C), pages 13-24.
    3. Dang, Canh Thien & Owens, Trudy, 2020. "Does transparency come at the cost of charitable services? Evidence from investigating British charities," Journal of Economic Behavior & Organization, Elsevier, vol. 172(C), pages 314-343.
    4. Gani Aldashev & Esteban Jaimovich & Thierry Verdier, 2023. "The Dark Side of Transparency: Mission Variety and Industry Equilibrium in Decentralised Public Good Provision," The Economic Journal, Royal Economic Society, vol. 133(654), pages 2085-2109.
    5. Valasek, Justin, 2018. "Dynamic reform of public institutions: A model of motivated agents and collective reputation," Journal of Public Economics, Elsevier, vol. 168(C), pages 94-108.
    6. Gareth D. Myles & Hana Yousefi, 2020. "Corruption as an Occupational Choice: Endogenous Corruption and Tax Policy," Southern Economic Journal, John Wiley & Sons, vol. 86(4), pages 1446-1474, April.
    7. Ines A. Ferreira & Sam Jones & Jorge Mouco & Ricardo Santos, 2021. "The determinants of occupational sorting: Evidence from Mozambique," WIDER Working Paper Series wp-2021-83, World Institute for Development Economic Research (UNU-WIDER).
    8. Timothy Besley & Maitreesh Ghatak, 2018. "Prosocial Motivation and Incentives," Annual Review of Economics, Annual Reviews, vol. 10(1), pages 411-438, August.
    9. 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.
    10. Azilah Kasim & Bussalin Khuadthong & Noormala Jailani & Muhammad Fauzi Mokhtar & Jasmine Zea Raziah Radha Rashid Radha & Maebel Leong, 2022. "The Importance of Community Perspectives on Hotel Community-Related CSR: A Position Paper," Sustainability, MDPI, vol. 14(8), pages 1-17, April.

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    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
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • D50 - Microeconomics - - General Equilibrium and Disequilibrium - - - General

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