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

Mission-oriented organizations, such as nonpro…t 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 nonpro…t sector. This paper provides an explanation for the fact that nonpro…t employers are uniquely able to attract such volunteers with social concerns and career aspirations and for the related observation that nonpro…ts …gure prominently in mission-related activities. Our theory is predicated on that –by committing to not distributing pro…ts –nonpro…t incorporation relaxes the incentive constraint that employers face when implicitly contracting with volunteers, without relying on ex ante di¤erences in workers’preferences over the employer’s identity or inherent asymmetries between nonpro…t and for-pro…t providers. The not-for-pro…t commitment is shown to be e¤ective only in activities where producers, who can choose to be for-pro…t or nonpro…t, care about the level or quality of the service being provided. Thus, in the equilibrium of the model developed here nonpro…t entry in sectors where missions play a de…ning role and the hiring of volunteers arise endogenously due to economic forces. This equilibrium outcome has some desirable welfare properties. JEL Classi…cation: D21, H41, J41, L31 Keywords: volunteers, nonpro…t institutions, privately provided public goods I am most grateful to Patrick Francois for his valuable advice, continuous support and patience. I am also indebted to Mukesh Eswaran, Steeve Mongrain, Hugh Neary, Horatiu Rus and Ralph Winter for helpful comments and suggestions. I have also bene…ted from comments by seminar participants at UBC, Wilfrid Laurier University, CRAI, Southern Methodist University, University of Southampton, University of St.Andrews, IMT Lucca and ESNIE 07. All errors are my own. yEconomics Division, University of Southampton, Southampton SO17 1BJ, United Kingdom. E-mail: [email protected]