Workers’ Motivation and Quality of Services in Mission-Driven Sectors
Francesca Barigozzi,
Chiara Canta and
Helmuth Cremer
No 12011, CESifo Working Paper Series from CESifo
Abstract:
This paper studies how firms’ ownership choices and workers’ intrinsic motivation jointly shape service quality and market outcomes in labor-intensive, mission-driven sectors. Two organizations first choose whether to operate as standard for-profit or as mission-oriented firms, and then compete in both the labor and the user markets. Mission-oriented firms have higher unit costs but attract better-motivated workers. Service quality is endogenously determined through the sorting of intrinsically motivated workers and depends on the firm's ownership type. We show that all market structures - standard, mission-oriented, or mixed - can arise in equilibrium, and that mixed structures can be Pareto superior by efficiently allocating the most motivated workers to the mission-oriented firm while preserving the cost advantage of the other firm. While equilibrium outcomes generally diverge from the social optimum due to externalities and lack of coordination, they are both driven by the trade-off between cost-efficiency and motivation. The model helps explain the coexistence of heterogeneous ownership structures observed in some sectors - such as the nursing homes sector - and identifies conditions under which such diversity is welfare-enhancing.
Keywords: mission-driven sectors; mission-oriented firms; workers' motivation; endogenous market structure; welfare (search for similar items in EconPapers)
JEL-codes: J21 L13 L31 (search for similar items in EconPapers)
Date: 2025
New Economics Papers: this item is included in nep-gth, nep-lma and nep-mic
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https://www.ifo.de/DocDL/cesifo1_wp12011.pdf (application/pdf)
Related works:
Working Paper: Workers’ Motivation and Quality of Services in Mission-Driven Sectors (2025) 
Working Paper: Workers’ Motivation and Quality of Services in Mission-Driven Sectors (2025) 
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Persistent link: https://EconPapers.repec.org/RePEc:ces:ceswps:_12011
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