Discussion Paper Details

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

Author(s): Maitreesh Ghatak and Hannes Felix Mueller

Publication Date: January 2010

Keyword(s): free riding, intrinsic motivation, labor donation and not-for-profits

Programme Area(s): Public Economics

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.

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Bibliographic Reference

Ghatak, M and Mueller, H. 2010. 'Thanks for Nothing? Not-for-Profits and Motivated Agents'. London, Centre for Economic Policy Research.