Technical Report Compensation and Intrinsic Motivation in Nonprofit and For-Profit Organizations

DeVaro, Jed  ,  Maxwell, Nan  ,  Morita, Hodaka

2016-03 , Institute of Economic Research, Hitotsubashi University
We develop a theoretical model in which for-profit and nonprofit employers compete to hire a worker who derives intrinsic motivation from the nonprofit’s social mission. We also use a unique data set of California establishments to provide new evidence on sectoral differences in pay and HRM systems, finding a greater incidence of training and benefits in nonprofits, lower wages (with the wage gap increasing in skill level), and less incentive pay than in for-profits. The model is used to interpret both this new evidence and other empirical results from the literature, including the inconclusive sign of the FP-NP wage differential.

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