Download this Paper Open PDF in Browser

Flypaper Nonprofits: The Impact of Federal Grant Structure on Nonprofit Expenditure Decisions

Public Finance Review May 22, 2012 doi: 10.1177/1091142112446845

34 Pages Posted: 21 Jun 2011 Last revised: 30 Jan 2014

Jeremy P. Thornton

Samford University - Brock School of Business

Date Written: February 20, 2011

Abstract

This paper examines the behavioral influence of federal grants on nonprofit firms. The topic is of particular concern governments who wish to stimulate the private provision of public services. Recent research shows that grants may inadvertently reduce private sector provision, by causing a reduction in nonprofit fundraising activity. This study extends work on federal grants by examining the differential influence of incentive versus lump-sum style grants on the subsequent expenditures of recipient nonprofit firms. The paper draws detailed grant data from the Federal Assistance Award Data System (FAADS), which includes structural characteristics of the grant. Empirical results demonstrate that the structure of the grant matters a great deal. Though relatively uncommon in the data, incentive grants are particularly effective at stimulating both additional fundraising activity and output of the firm. More widespread use of incentive grants could mitigate the tendency of government grants to reduce private provision of charitable goods.

Keywords: nonprofits, grants, flypaper, incentives

JEL Classification: L3, H3, H4

Suggested Citation

Thornton, Jeremy P., Flypaper Nonprofits: The Impact of Federal Grant Structure on Nonprofit Expenditure Decisions (February 20, 2011). Public Finance Review May 22, 2012 doi: 10.1177/1091142112446845. Available at SSRN: https://ssrn.com/abstract=1868227 or http://dx.doi.org/10.2139/ssrn.1868227

Jeremy P. Thornton (Contact Author)

Samford University - Brock School of Business ( email )

800 Lakeshore Drive
Birmingham, AL 35229
United States
2057262128 (Phone)

HOME PAGE: http://https://www.samford.edu/business/directory/Thornton-Jeremy

Paper statistics

Downloads
73
Rank
275,320
Abstract Views
492