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Abstract:
We use proprietary quality of care data to examine the consequences of organizational form in privatized foster care services. This paper contributes to the empirical literature regarding the influence of organizational form on the performance outcomes of firms. Advocates argue that the nonprofits offer important consumer protections when public services are contracted to private agencies. The contract failure hypothesis proposes that nonprofits should provide higher quality services, relative to for-profits, when output quality is costly to observe. Contrary to expectations, we find that nonprofit firms do not offer higher quality services. Though, the presence of for-profit agencies appears to have a negative influence on nonprofit performance. We examine two possible rationales for this finding. First, monitoring efforts by state government may be sufficient to mitigate the incentive to shirk on non-contractible quality. Alternatively, anomalies in reporting patterns may indicate that for-profit firms misreport quality data to match their nonprofit counterparts.

Nonprofit, Organizational Form, Contract Failure, Foster Care

Abstract:
This paper extends a transaction costs framework to the nonprofit sector where information asymmetries are typically acute. I explore the decision of charitable foundations to place material restrictions on grants to nonprofits. Foundations often place constraints on grant use to limit cross-subsidy of projects or ex-post opportunism by nonprofit managers. In contrast, nonprofits prefer fewer restrictions to smooth income across revenue streams or compensate for shifts in demand. The paper utilizes a pseudo panel of 6,000 grant contracts to examine the relationship between the various costs of those restrictions and the observed characteristics of grant contracts. Empirical results confirm received theory that high contracting costs will reduce the probability of grant restrictions.

Nonprofit, Grant, Incomplete Contracts, Transaction Costs

Abstract:
Fund-raising expenditures represent an important strategic decision for nonprofit managers inthe face of scarce donor resources. Privately, nonprofit managers weigh the trade-off between reaching new donors and increasing the implicit price of output to its constituents. Socially, competition among nonprofit firms for donations may produce an excessive level of fund-raising. This article empirically examines nonprofit fund-raising decisions, privately and socially, under varying market conditions. Analysis of financial data reveals that as markets become more competitive, nonprofits follow their private incentives by reducing their fund-raising expenditures. However, the author finds evidence that, collectively, nonprofits may spend an inefficiently high share of their revenues on fund-raising. As such, the author offers alternatives to the common practice of collective fund-raising through institutions such as the UnitedWay. Implications of the study include increasing price transparency to improve market discipline or raising legal and financial barriers to entry.

nonprofit, fund-raising, market structure, efficiency

Abstract:
We examine the relationship between charitable giving of time and money in the context of religiosity. While a substantial literature exists in economics of giving, particularly with respect to the influence of taxes, relatively little empirical work has focused on the relationship between volunteering time, financial gifts and religious faith. Theoretically, these decisions are interrelated, though doubt remains about the magnitude (and even the sign) of these relationships. The recent Center on Philanthropy Panel Study (COPPS) addition to the Panel Study of Income Dynamics (PSID) expands the information set available regarding charitable behavior of individuals over time. The nationally representative sample and panel structure of the data mitigates the selection and omitted variable biases which plague earlier studies.

Our study is placed in the context of a robust literature examining income and tax price elasticities for charitable giving. By examining tax price, previous studies attempt to estimate the trade off between government and private provision of public goods. However, these studies typically aggregate religious and secular donations which may not be equally public in nature. We propose that religious giving mimics private consumption (or warm-glow as described by Adreoni (1990)), while secular giving more closely follows the pure public goods model described by Bergstrom, Blume, and Varian (1986). Theoretical models of religious behavior indicate significant differences in motivation for the provision of religious goods versus pure public goods models. We demonstrate that disaggregating religious versus secular contributions by religious and secular donors is a powerful moderator in explaining charitable behavior, reconciling previous conflicting results in the literature.

Consistent with theory on religious behavior, we find that religious individuals giving to religious causes are substantially less sensitive to changes in tax price, but more sensitive to changes in income, than their secular counterparts. We extend this analysis to include individuals who experience dramatic shifts in economic status or experience changes in religious preference. Our empirical results are discussed in reference to current theoretical models of religious giving and the private provision of public goods.

Relgion, Charity, Taxes, COPPS

Abstract:
This paper examines the issue of international development partnerships among NGOs in the context of a principle-agent framework. Specifically, we characterize the ability of shared religious values in development partnerships to mitigate agency problems. These advantages are weighed against practitioner reluctance to engage religious organizations in the development process or to fully utilize economic incentives. The paper is supported by survey responses from Christian ministry organizations involved in international partnerships.

agency, international development, religion

Abstract:
There exists a substantive economic literature examining the determinants of charitable behavior. However, only a few of these studies address the influence of religiosity in those decisions. Our paper extends this line of inquiry by examining the differential influence of religious doctrines on charitable giving behaviors by households. We adopted the framework proposed by McCleary (2007) that constructs religious typologies based on salvic merit. From this typology we test hypotheses about differences in charitable behavior across religion faiths. We propose that households with beliefs associated with high salvic merit will be relatively insensitive to changes in tax subsidies for charitable gifts. Moreover, this effect will be strongest for devoted households. Our empirical results confirm our expectations that religious doctrine impacts charitable giving. Households behave as if they are incorporating religious doctrine when making decision about charitable giving. Consequently, our findings demonstrate that the influence of religious belief on charitable giving has been undervalued in the charitable giving literature.

Religion, Charitable Giving

Abstract:
This article investigates theoretically and empirically the effects of competition for donors on the behavior of nonprofit organizations. Theoretically, we consider a situation in which nonprofit organizations use donations to produce some commodity, but the use of donations is only partially contractible. The main results of the model indicate that an increase in competition (i) decreases the fraction of donations allocated to perquisite consumption and (ii) increases the fraction of donations allocated to promotional expenditures. Moreover, the effects of competition are magnified by the ability to contract on the use of donations. These hypotheses are tested with data on the expenditures of nonprofit organizations in a number of subsectors where competition is primarily local. We use across-metropolitan statistical areas' variation to measure differences in competition and proxy contractibility by the importance of tangible assets, which are more easily observed by donors. The estimated effects of competition and contractibility are consistent with our model.

Abstract:
This paper investigates theoretically and empirically the effects of competition for donors on the behavior of non-profit organizations. Theoretically, we consider a situation in which non-profit organizations use donations to produce some commodity, but the use of donations is only partially contractible. The main results of the model indicate an increase in competition (i) decreases the fraction of donations allocated to perquisite consumption and (ii) increases the fraction of donations allocated to promotional expenditures. Moreover, the effectiveness of competition increases with the ability to contract on the use of donations. The hypotheses are tested with data on the expenditures of non-profit organizations in a number of sub-sectors where competition is primarily local. In addition, we use across-MSA variation to measure differences in competition and proxy contractibility by the importance of tangible assets, which are more easily observed by donors. The estimated effects of competition and contractibility are consistent with our model.

Nonprofit Organizations, Contractibility, Competition

Abstract:
Donors increasingly rely on financial information reported by IRS Form 990 to allocate donations among nonprofit firms. However, competition among nonprofits creates an incentive for managers to under-report management and fundraising expenditures to make their firms appear relatively efficient. Increasingly, researchers suspect that information provided in the Form 990 may not accurately portray the true financial condition of nonprofit firms. Inaccurate price information weakens the ability of donors to promote efficiency and discipline excess among nonprofit managers. This paper examines the reaction of donors to variation in Form 990 reporting quality. We find that donors reward nonprofit firms for investments in more accurate financial reporting. Additionally, higher quality financial information sharpens the ability of donor markets to discipline nonprofit firms by increasing price sensitivity. The primary implication of this study is that regulatory improvements in reporting quality could increase the ability of donor markets to serve as a viable governance mechanism for improving nonprofit efficiency.

Nonprofits, Price Elasticity, Financial Reporting Quality, Single Audit Act

Abstract:
Donors increasingly rely on financial information reported by IRS Form 990 to allocate donations among nonprofit firms. However, competition among nonprofits creates an incentive for managers to under-report management and fundraising expenditures to make their firms appear relatively efficient. Increasingly, researchers suspect that information provided in the Form 990 may not accurately portray the true financial condition of nonprofit firms. Inaccurate price information weakens the ability of donors to promote efficiency and discipline excess among nonprofit managers. This paper examines the reaction of donors to variation in Form 990 reporting quality. We find that donors reward nonprofit firms for investments in more accurate financial reporting. Additionally, higher quality financial information sharpens the ability of donor markets to discipline nonprofit firms by increasing price sensitivity. The primary implication of this study is that regulatory improvements in reporting quality could increase the ability of donor markets to serve as a viable governance mechanism for improving nonprofit efficiency.

Nonprofits, Price Elasticity, Financial Reporting Quality, Single Audit Act