Volunteer Hiring, Organizational Form and the Provision of Mission-Oriented Goods

Michael Vlassopoulos ()

Discussion Paper Series In Economics And Econometrics from University of Southampton, Economics Division, School of Social Sciences

Abstract: Mission-oriented organizations, such as nonprofit organizations and NGOs, rely critically on volunteer recruitment to achieve their organizational goals. Besides serving as an outlet of altruistic motives, volunteering often acts as a stepping-stone for a paid position in the nonprofit sector. This paper provides an explanation for the fact that nonprofit employers are uniquely able to attract such volunteers with social concerns and career aspirations and for the related observation that nonprofits figure prominently in mission-related activities. Our theory is predicated on that - by committing to not distributing profits - nonprofit incorporation relaxes the incentive constraint that employers face when implicitly contracting with volunteers, without relying on ex ante differences in workers' preferences over the employer's identity or inherent asymmetries between nonprofit and for-profit providers. The not-for-profit commitment is shown to be effective only in activities where producers, who can choose to be for-profit or nonprofit, care about the level or quality of the service being provided. Thus, in the equilibrium of the model developed here nonprofit entry in sectors where missions play a defining role and the hiring of volunteers arise endogenously due to economic forces. This equilibrium outcome has some desirable welfare properties.
JEL Classification: D21, H41, J41, L31
Keywords; volunteers, nonprofit institutions, privately provided public goods

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Persistent link: http://EconPapers.repec.org/RePEc:stn:sotoec:0707

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