Altruism, Rivalry and Crowding-Out in the Nonprofit Firm's Supply of Charity Services: the Case of Hospitals

38 Pages Posted: 15 Mar 2004 Last revised: 29 Jan 2014

See all articles by Richard G. Frank

Richard G. Frank

Harvard Medical School; National Bureau of Economic Research (NBER)

David S. Salkever

UMBC, Department of Public Policy

Date Written: October 1988

Abstract

This paper extends previous research on Individuals' supply of charitable donations to the behavior of nonprofit firms. Specifically, we study provision of charity care by private, nonprofit hospitals. We demonstrate that In the absence of large positive income effects on charity care supply, convex preferences for the nonprofit hospital imply crowding out by other private or government hospitals. Extending our model to include patient heterogeneity and impure altruism (rivalry) provides a possible explanation for the previously reported empirical result that both crowding out and income effects on indigent care supply are often weak or insignificant. Empirical analysis of data for hospitals in Maryland provides strong evidence of rivalry on the supply of outpatient plus inpatient charity care, but not when the analysis is confined to inpatient care.

Suggested Citation

Frank, Richard G. and Salkever, David S., Altruism, Rivalry and Crowding-Out in the Nonprofit Firm's Supply of Charity Services: the Case of Hospitals (October 1988). NBER Working Paper No. w2753. Available at SSRN: https://ssrn.com/abstract=447184

Richard G. Frank (Contact Author)

Harvard Medical School ( email )

Department of Health Care Policy
Boston, MA 02115
United States
617-432-0178 (Phone)
617-432-1219 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

David S. Salkever

UMBC, Department of Public Policy ( email )

1000 Hilltop Circle
Baltimore, MD 21250

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