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The fallacy of the Good Samaritan: Volunteering as a weird way of making money

This paper explores individual motives for volunteering: The analysis is based on the interpretation of volunteering as a consumption good (consumption model) or as a mean to increase individual’s own human capital (investment model). We present an econometric framework taking into account self selection into volunteering and simultaneity between the volunteering decision and the determination of income in order to test these two models and to identify the underlying motives. We find strong statistical evidence for the investment model with a highly robust and significant impact of volunteering on the wage rate. On average the wage premium as the difference in the wage rate between one person volunteering and not volunteering amounts up to 15.7 percent. Within the framework of the investment model it turns out that the number of volunteering hours plays a major role in explaining this wage premium. This supports the idea of volunteering as a mean to accumulate human capital and signalling willingness to perform. As far as the consumption model is concerned we find no convincing statistical evidence for its validity. The strong evidence for the investment model requires the consideration of voluntary activities in the estimation of wage equations. Moreover, we conclude that the existence of the wage premium is a decisive factor for people to volunteer or not and therefore reflects an important argument in the recruitment process of volunteers for several organisations.

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Paper provided by Department of Economics, Johannes Kepler University Linz, Austria in its series Economics working papers with number 2004-15.

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Date of creation: Dec 2004
Date of revision:
Handle: RePEc:jku:econwp:2004_15
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  1. Meier, Stephan & Stutzer, Alois, 2004. "Is Volunteering Rewarding in Itself?," IZA Discussion Papers 1045, Institute for the Study of Labor (IZA).
  2. Christopher F Baum & Mark E. Schaffer & Steven Stillman, 2003. "Instrumental variables and GMM: Estimation and testing," Stata Journal, StataCorp LP, vol. 3(1), pages 1-31, March.
  3. Day, K.M. & Devlin, R.A., 1993. "The Payoff to Work without Pay: Volunteer Work as an Investment in Human Capital," Working Papers 9310e, University of Ottawa, Department of Economics.
  4. Unger, Lynette S., 1991. "Altruism as a motivation to volunteer," Journal of Economic Psychology, Elsevier, vol. 12(1), pages 71-100, March.
  5. Lewis M. Segal & Burton A. Weisbrod, 2002. "Volunteer labor sorting across industries," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 21(3), pages 427-447.
  6. Bruno S. Frey & Lorenz Goette, . "Does Pay Motivate Volunteers?," IEW - Working Papers 007, Institute for Empirical Research in Economics - University of Zurich.
  7. Andreoni, James, 1990. "Impure Altruism and Donations to Public Goods: A Theory of Warm-Glow Giving?," Economic Journal, Royal Economic Society, vol. 100(401), pages 464-77, June.
  8. John Gibson, 1999. "Correlation versus causation and the apparent external benefits of education," New Zealand Economic Papers, Taylor & Francis Journals, vol. 33(1), pages 51-69.
  9. Paul S. Carlin, 2001. "Evidence on the Volunteer Labor Supply of Married Women," Southern Economic Journal, Southern Economic Association, vol. 67(4), pages 801-824, April.
  10. Pak-Wai Liu & Junsen Zhang, 1999. "Assortative mating versus the cross-productivity effect," Applied Economics Letters, Taylor & Francis Journals, vol. 6(8), pages 523-525.
  11. Schady, Norbert R., 2001. "Who participates : the supply of volunteer labor and the distribution of government programs in rural Peru," Policy Research Working Paper Series 2671, The World Bank.
  12. Sascha O. Becker & Andrea Ichino, 2002. "Estimation of average treatment effects based on propensity scores," Stata Journal, StataCorp LP, vol. 2(4), pages 358-377, November.
  13. Lorenzo Cappellari & Gilberto Turati, 2004. "Volunteer Labour Supply: the role of workers' motivations," Annals of Public and Cooperative Economics, Wiley Blackwell, vol. 75(4), pages 619-643, December.
  14. Cugno, Franco & Ferrero, Mario, 2004. "Competition among volunteers," European Journal of Political Economy, Elsevier, vol. 20(3), pages 637-654, September.
  15. Omar M. G. Keshk, 2003. "CDSIMEQ: A program to implement two-stage probit least squares," Stata Journal, StataCorp LP, vol. 3(2), pages 157-167, June.
  16. Smith, Richard J & Blundell, Richard W, 1986. "An Exogeneity Test for a Simultaneous Equation Tobit Model with an Application to Labor Supply," Econometrica, Econometric Society, vol. 54(3), pages 679-85, May.
  17. Amemiya, Takeshi, 1978. "The Estimation of a Simultaneous Equation Generalized Probit Model," Econometrica, Econometric Society, vol. 46(5), pages 1193-1205, September.
  18. Frey, Bruno S, 1997. "A Constitution for Knaves Crowds Out Civic Virtues," Economic Journal, Royal Economic Society, vol. 107(443), pages 1043-53, July.
  19. Rivers, Douglas & Vuong, Quang H., 1988. "Limited information estimators and exogeneity tests for simultaneous probit models," Journal of Econometrics, Elsevier, vol. 39(3), pages 347-366, November.
  20. Schram, Vicki R & Dunsing, Marilyn M, 1981. " Influences on Married Women's Volunteer Work Participation," Journal of Consumer Research, University of Chicago Press, vol. 7(4), pages 372-79, March.
  21. Richard B. Freeman, 1996. "Working for Nothing: The Supply of Volunteer Labor," NBER Working Papers 5435, National Bureau of Economic Research, Inc.
  22. Newey, Whitney K., 1987. "Efficient estimation of limited dependent variable models with endogenous explanatory variables," Journal of Econometrics, Elsevier, vol. 36(3), pages 231-250, November.
  23. Kathleen M. Day & Rose Anne Devlin, 1996. "Volunteerism and Crowding Out: Canadian Econometric Evidence," Canadian Journal of Economics, Canadian Economics Association, vol. 29(1), pages 37-53, February.
  24. Menchik, Paul L. & Weisbrod, Burton A., 1987. "Volunteer labor supply," Journal of Public Economics, Elsevier, vol. 32(2), pages 159-183, March.
  25. Katz, Eliakim & Rosenberg, Jacob, 2005. "An economic interpretation of institutional volunteering," European Journal of Political Economy, Elsevier, vol. 21(2), pages 429-443, June.
  26. Saloner, Garth, 1985. "Old Boy Networks as Screening Mechanisms," Journal of Labor Economics, University of Chicago Press, vol. 3(3), pages 255-67, July.
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