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|
|Date of revision:|
|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/|
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.:
- 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.
- 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.
- Besley, Timothy J. & Ghatak, Maitreesh, 2004.
"Competition and Incentives with Motivated Agents,"
CEPR Discussion Papers
4641, C.E.P.R. Discussion Papers.
- Tim Besley & Maitreesh Ghatak, 2005. "Competition and incentives with motivated agents," LSE Research Online Documents on Economics 928, London School of Economics and Political Science, LSE Library.
- Timothy Besley & Maitreesh Ghatak, 2003. "Competition and incentives with motivated agents," LSE Research Online Documents on Economics 2202, London School of Economics and Political Science, LSE Library.
- Lanse Minkler, 2002.
"Shirking and Motivation in Firms: Survey Evidence on Worker Attitudes,"
2002-37, University of Connecticut, Department of Economics.
- 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 Motivations in Firms: Survey Evidence on Worker Attitudes," Working papers 2002-40, University of Connecticut, Department of Economics.
- 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 & A. Ferrer-i-Carbonell, 2002. "The Anatomy of Subjective Well-being," Tinbergen Institute Discussion Papers 02-022/3, Tinbergen Institute.
- 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.
- Auriol, Emmanuelle & Brilon, Stefanie, 2012.
"Anti-Social Behavior in Profit and Nonprofit Organizations,"
CEPR Discussion Papers
9009, C.E.P.R. Discussion Papers.
- Auriol, Emmanuelle & Brilon, Stefanie, 2014. "Anti-social behavior in profit and nonprofit organizations," Journal of Public Economics, Elsevier, vol. 117(C), pages 149-161.
- 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.
- 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.
- Christopher Ruhm & Carey Borkoski, 2000.
"Compensation in the Nonprofit Sector,"
NBER Working Papers
7562, National Bureau of Economic Research, Inc.
- Herold, Florian, 2010. "Contractual incompleteness as a signal of trust," Games and Economic Behavior, Elsevier, vol. 68(1), pages 180-191, January.
- Roland Bénabou & Jean Tirole, 2003. "Intrinsic and Extrinsic Motivation," Review of Economic Studies, Oxford University Press, vol. 70(3), pages 489-520.
- 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.
- Canice Prendergast, 1999. "The Provision of Incentives in Firms," Journal of Economic Literature, American Economic Association, vol. 37(1), pages 7-63, March.
- 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.
- Ada Ferrer-i-Carbonell & Paul Frijters, 2004. "How Important is Methodology for the estimates of the determinants of Happiness?," Economic Journal, Royal Economic Society, vol. 114(497), pages 641-659, 07.
- 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.
- 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, 02.
- 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.
- 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 750-81, October.
- 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.
- 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.
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 references are entirely missing, you can add them using this form.