Nonprofits and the Scope of Government: Theory and an Application to the Health Sector

Karen Eggleston

No 32020, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Nonprofits supply many tax-financed services like healthcare and education. Yet nonprofits are absent from the canonical property rights theory of ownership. Extending the government “make or buy” decision to nonprofits and ex post frictions based on contracts as reference points suggests that contracting out to a nonprofit can be optimal when “mission” alignment credibly signals adherence to the spirit and not just the letter of the contract in unforeseen contingencies. The model sheds light on differential nonprofit presence across the spectrum of basic services, as illustrated by an application to the health sector.

JEL-codes: H1 H4 H44 I0 I11 (search for similar items in EconPapers)
Date: 2024-01
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