Thanks for Nothing? Not-for-Profits and Motivated Agents

43 Pages Posted: 3 Feb 2010

See all articles by Maitreesh Ghatak

Maitreesh Ghatak

London School of Economics (LSE) - Department of Economics

Hannes Felix Mueller

Instituto de Análisis Económic (IAE) Barcelona

Multiple version iconThere are 2 versions of this paper

Date Written: November 2009

Abstract

We re-examine the labor donation theory of not-for-profits and show that these organizations may exist not necessarily because motivated workers prefer to work in them, or that they dominate for-profits in terms of welfare, but because the excess supply of motivated workers makes the non-profit form more attractive to managers. We show that if firms had to compete for motivated workers then not-for-profit firms would be competed out by for-profit firms. Therefore, the choice between not-for-profit and for-profit provision is not always a question of resolving incentive problems but also one of distribution of rents between management and workers, and consequently, the relative scarcity of workers plays an important role in this choice.

JEL Classification: L31, J32, L33, J42

Suggested Citation

Ghatak, Maitreesh and Mueller, Hannes Felix, Thanks for Nothing? Not-for-Profits and Motivated Agents (November 2009). LSE STICERD Research Paper No. EOPP014, Available at SSRN: https://ssrn.com/abstract=1546908

Maitreesh Ghatak (Contact Author)

London School of Economics (LSE) - Department of Economics ( email )

Houghton Street
London WC2A 2AE
United Kingdom
44 20 7852 3568 (Phone)
44 20 7955 6951 (Fax)

HOME PAGE: http://sticerd.lse.ac.uk/dps/adds/ghatak/cv-lse-sept02.pdf

Hannes Felix Mueller

Instituto de Análisis Económic (IAE) Barcelona ( email )

Barcelona, Bellaterra 08193
Spain

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