When warm glow burns: Motivational (mis)allocation in the non-profit sector
Gani Aldashev is Associate Professor of Economics at the University of Namur, Belgium. Aldashev does research in development economics, public economics, political economics, and economic history, and his research agenda includes the Economics of NGOs, non-profit organizations, and aid effectiveness. Some of his research projects extend into behavioral/experimental economics, environmental economics, and finance.
In this seminar he will discuss the links between NGO finances, development workers' motivations and NGOs' achievements.
He will present his paper
When warm glow burns:
Motivational (mis)allocation in the non-profit sector
We build an occupational-choice general-equilibrium model of an economy with the non-profit sector financed through private warm-glow donations. Lack of monitoring on the use of funds implies that an increase of funds of the non-profit sector (because of a higher income in the for-profit sector, a stronger preference for giving, or an inflow of foreign aid) worsens the motivational composition and performance of the non-profit sector. If motivated donors give more than unmotivated ones, there exist two stable (motivational) equilibria. Linking donations to the motivational composition of the non-profit sector or a tax-financed public funding of non-profits can eliminate the bad equilibrium.