When warm glow burns: Motivational (mis)allocation in the non-profit sector

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Date
2015-02
Collection title
NOPOOR Working Paper
Collection Id
20
Dewey
Croissance et développement économiques
Sujet
non-profit organizations; charitable giving; altruism; occupational choice; foreign aid
JEL code
L.L3.L31; D.D6.D64; J.J2.J24; D.D5
URI
https://basepub.dauphine.fr/handle/123456789/17710
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Author
Aldashev, Gani
410992 Centre de recherche en économie du développement [CRED]
10592 Théorie économique, modélisation et applications [THEMA]
Jaimovich, Esteban
44799 School of economics
Verdier, Thierry
139754 Paris-Jourdan Sciences Economiques [PSE]
Type
Document de travail / Working paper
Item number of pages
49
Abstract (EN)
We build a general-equilibrium model of an economy with the non-pro.t sector .nanced through private warm-glow donations. Lack of monitoring on the use of funds implies that an increase of funds of the non-pro.t sector (because of a higher income in the for-pro.t sector, a stronger preference for giving, or an in.ow of foreign aid) worsens the motivational composition and performance of the non-pro.t sector. If motivated donors give more than unmotivated ones, there exist two stable (motivational) equilibria. Linking donations to the motivational composition of the non-pro.t sector or a tax-.nanced public funding of non-pro.ts can eliminate the bad equilibrium.