Effort and Monetary Incentives in Nonprofit and For-Profit Organizations
The goal of our paper is to analyze the differences in terms of effort sensitivity to monetary incentive schemes between nonprofit and for-profit salaried workers. Nonprofit organizations being more likely to be devoted to social missions, nonprofit workers would be more pro-socially motivated in their job that their for-profit counterparts. Therefore, monetary incentives like performance pay would be less effective in inducing effort in the nonprofit sector as nonprofit workers are ready to donate labour to their employers. Using workers' stated sensitivity of effort to current and hypothetical use of monetary incentives, we find a significantly higher sensitivity of effort in the for-profit sector using linear and ordered probit estimation. To account for the voluntary selection in sector, we apply an instrumental variable estimation technique and the findings confirm the existence of a positive correlation between unobserved variables explaining sector choice and the unobserved variables determining the sensitivity of effort to actual or hypothetical monetary incentives. Finally, using another econometric methodology based on the idea of omitted variable bias, we are able to conclude that the relative ineffectiveness of monetary incentives in the nonprofit sector is more likely to be due to the intrinsic motivation of nonprofit workers than to any other workers' personality trait like pessimism or optimism that could differ between the two sectors.
|Date of creation:||Jun 2012|
|Note:||View the original document on HAL open archive server: https://halshs.archives-ouvertes.fr/halshs-00856261|
|Contact details of provider:|| Web page: https://hal.archives-ouvertes.fr/|
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Minkler, Lanse, 2004.
"Shirking and motivations in firms: survey evidence on worker attitudes,"
International Journal of Industrial Organization,
Elsevier, vol. 22(6), pages 863-884, June.
- Lanse Minkler, 2002. "Shirking and Motivation in Firms: Survey Evidence on Worker Attitudes," Working papers 2002-37, University of Connecticut, Department of Economics.
- Lanse Minkler, 2002. "Shirking and Motivations in Firms: Survey Evidence on Worker Attitudes," Working papers 2002-40, University of Connecticut, Department of Economics.
- Gregg, Paul & Grout, Paul A. & Ratcliffe, Anita & Smith, Sarah & Windmeijer, Frank, 2011.
"How important is pro-social behaviour in the delivery of public services?,"
Journal of Public Economics,
Elsevier, vol. 95(7-8), pages 758-766, August.
- Gregg, Paul & Grout, Paul A. & Ratcliffe, Anita & Smith, Sarah & Windmeijer, Frank, 2011. "How important is pro-social behaviour in the delivery of public services?," Journal of Public Economics, Elsevier, vol. 95(7), pages 758-766.
- 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.
- Timothy Besley & Maitreesh Ghatak, 2005.
"Competition and Incentives with Motivated Agents,"
American Economic Review,
American Economic Association, vol. 95(3), pages 616-636, June.
- Besley, Timothy & Ghatak, Maitreesh, 2003. "Competition and incentives with motivated agents," LSE Research Online Documents on Economics 2202, London School of Economics and Political Science, LSE Library.
- Besley, Tim & Ghatak, Maitreesh, 2005. "Competition and incentives with motivated agents," LSE Research Online Documents on Economics 928, London School of Economics and Political Science, LSE Library.
- Besley, Timothy J. & Ghatak, Maitreesh, 2004. "Competition and Incentives with Motivated Agents," CEPR Discussion Papers 4641, C.E.P.R. Discussion Papers.
- Christopher J. Ruhm & Carey Borkoski, 2003. "Compensation in the Nonprofit Sector," Journal of Human Resources, University of Wisconsin Press, vol. 38(4).
- Canice Prendergast, 1999. "The Provision of Incentives in Firms," Journal of Economic Literature, American Economic Association, vol. 37(1), pages 7-63, March.
- Leete, Laura, 2000. "Wage equity and employee motivation in nonprofit and for-profit organizations," Journal of Economic Behavior & Organization, Elsevier, vol. 43(4), pages 423-446, December.
- Astrid Pennerstorfer & Ulrike Schneider, 2010. "What Determines the (Internal) Wage Distribution in Non-Profit Organizations?," Kyklos, Wiley Blackwell, vol. 63(4), pages 580-596, November.
- Auriol, Emmanuelle & Brilon, Stefanie, 2014.
"Anti-social behavior in profit and nonprofit organizations,"
Journal of Public Economics,
Elsevier, vol. 117(C), pages 149-161.
- Auriol, Emmanuelle & Brilon, Stefanie, 2012. "Anti-Social Behavior in Profit and Nonprofit Organizations," CEPR Discussion Papers 9009, C.E.P.R. Discussion Papers.
- Joseph Lanfranchi & Mathieu Narcy & Makram Larguem, 2010. "Shedding new light on intrinsic motivation to work: evidence from a discrete choice experiment," Kyklos, Wiley Blackwell, vol. 63(1), pages 75-93, February.
- Roomkin, Myron J & Weisbrod, Burton A, 1999. "Managerial Compensation and Incentives in For-Profit and Nonprofit Hospitals," Journal of Law, Economics, and Organization, Oxford University Press, vol. 15(3), pages 750-781, October.
- Herold, Florian, 2010. "Contractual incompleteness as a signal of trust," Games and Economic Behavior, Elsevier, vol. 68(1), pages 180-191, January.
- Carpenter, Jeffrey & Myers, Caitlin Knowles, 2010.
"Why volunteer? Evidence on the role of altruism, image, and incentives,"
Journal of Public Economics,
Elsevier, vol. 94(11-12), pages 911-920, December.
- Jeffrey Carpenter & Caitlin Knowles Myers, 2010. "Why Volunteer? Evidence on the Role of Altruism, Image, and Incentives," Middlebury College Working Paper Series 1023, Middlebury College, Department of Economics.
- Lanfranchi J. & Narcy M., 2006. "Wages and effort in the French for-profit and nonprofit sectors: Labor Donation Theory Revisited," Working Papers ERMES 0620, ERMES, University Paris 2.
- van Praag, B. M. S. & Frijters, P. & Ferrer-i-Carbonell, A., 2003.
"The anatomy of subjective well-being,"
Journal of Economic Behavior & Organization,
Elsevier, vol. 51(1), pages 29-49, May.
- Bernard M. S. van Praag & P. Frijters & Ada Ferrer-i-Carbonell, 2001. "The Anatomy of Subjective Well-Being," Discussion Papers of DIW Berlin 265, DIW Berlin, German Institute for Economic Research.
- Bernard M.S. van Praag & P. Frijters & A. Ferrer-i-Carbonell, 2002. "The Anatomy of Subjective Well-being," Tinbergen Institute Discussion Papers 02-022/3, Tinbergen Institute.
- Patrick Francois & Michael Vlassopoulos, 2008. "Pro-social Motivation and the Delivery of Social Services," CESifo Economic Studies, CESifo, vol. 54(1), pages 22-54, March.
- Preston, Anne E, 1989. "The Nonprofit Worker in a For-Profit World," Journal of Labor Economics, University of Chicago Press, vol. 7(4), pages 438-463, October.
- Ada Ferrer-i-Carbonell & Paul Frijters, 2004.
"How Important is Methodology for the estimates of the determinants of Happiness?,"
Royal Economic Society, vol. 114(497), pages 641-659, July.
- Ada Ferrer-i-Carbonell & Paul Frijters, 2002. "How important is Methodology for the Estimates of the Determinants of Happiness?," Tinbergen Institute Discussion Papers 02-024/3, Tinbergen Institute.
- Ballou, Jeffrey P. & Weisbrod, Burton A., 2003. "Managerial rewards and the behavior of for-profit, governmental, and nonprofit organizations: evidence from the hospital industry," Journal of Public Economics, Elsevier, vol. 87(9-10), pages 1895-1920, September.
- Jed Devaro & Dana Brookshire, 2007. "Promotions and Incentives in Nonprofit and for-Profit Organizations," ILR Review, Cornell University, ILR School, vol. 60(3), pages 311-339, April.
- Roland Bénabou & Jean Tirole, 2003. "Intrinsic and Extrinsic Motivation," Review of Economic Studies, Oxford University Press, vol. 70(3), pages 489-520.
- Frey, Bruno S., 1997. "On the relationship between intrinsic and extrinsic work motivation1," International Journal of Industrial Organization, Elsevier, vol. 15(4), pages 427-439, July.
When requesting a correction, please mention this item's handle: RePEc:hal:wpaper:halshs-00856261. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (CCSD)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.