KYKLOS, Vol. 58 2005 No.

2, 155176

Not for the Prot, but for the Satisfaction?

Evidence on Worker Well-Being in Non-Prot Firms
Matthias Benz

I. INTRODUCTION
Non-prot organizations account for a substantial and increasing share of
employment and production in the economy. In the service sector, where most
non-prot organizations operate, their share of total employment was more
than 15 percent in the United States in 1990, and the non-prot sector has been
growing strongly between 1990 and 1995, by 35 percent (Weisbrod 1997: 542).
Similar gures apply to other countries, like Germany, France and the United
Kingdom, where non-prot organizations employ roughly 9 to 10 percent of
the total service sector workforce. The substantial role of non-prot organizations has attracted increasing interest by economists and business economists,
in an eort to analyze what functional role non-prots may play in a for-prot
world (e.g. Hansmann 1980, Rose-Ackerman 1996, Weisbrod 1988, Glaeser
2003). While non-prots traditionally have operated in areas such as education, research, arts, health care and other social services, recent developments
show that the non-prot form may also have a successful future in the high-tech
sector. Open source software projects like Linux, which are basically run on a
not-for-prot basis, have emerged as serious competitors for for-prot rms
like Microsoft.
The existence of non-prot rms has traditionally been explained by their
ability to mitigate certain product-market failures. Following Hansmanns
(1980) seminal work, non-prots are seen to have a competitive advantage
where the quality of a service is dicult to contract upon; consumers may then
prefer to deal with a non-prot rm, because it lacks the incentive to lower the
(non-contractible) quality of its services in order to raise prots (see also
Weisbrod 1988, Glaeser and Shleifer 2001). The recent rise of open source


Contact address: School of Law, 354 Boalt Hall, University of California at Berkeley, Berkeley, CA
94720-7200, USA; email: matbenz@iew.unizh.ch. I would like to thank Patrick Bolton, Robert D.
Cooter, Henry Hansmann, Raymond Miles, Christopher Taber, Tom Tyler, Burton Weisbrod and
the editors of Kyklos for helpful discussions and comments on an earlier version of this paper, and
I gratefully acknowledge nancial support by the Swiss National Science Foundation.

r 2005 Blackwell Publishing Ltd., 9600 Garsington Road, Oxford OX4 2DQ, UK
and 350 Main Street, Malden, MA 02148, USA

155

MATTHIAS BENZ

software has, however, drawn renewed attention to another advantage of nonprots: they may be particularly capable in motivating employees to voluntarily
contribute to a rms goals. The donative-labor hypothesis has been oered
as an important explanation for why open source projects can induce so many
unpaid volunteers to devote considerable time and eort to developing
software (e.g. Franck and Jungwirth 2003, Osterloh et al. 2003). For nonprot rms more generally, it has long been recognized that particular
requirements for employee motivation are likely to be important (Hansmann
1980, Rose-Ackerman 1996, Francois 2001). Employees in non-prot rms
are taken to be intrinsically motivated, be it by a desire to produce a quality
service, to promote the ideas or the vision of the non-prots mission, or to
assist in the production of a public good they see as desirable for society at
large. There is a strong notion that people working in non-prot rms derive
some other kind of utility from work than just the monetary reward that
compensates them for their work eort.
Although this view has received considerable attention, it has never been
tested directly. Most studies have investigated the issue indirectly by using a
compensating wage dierential approach: employees in non-prot rms should
be willing to work for a lower wage if they gain additional, intrinsic utility
from their job. The evidence of a substantial number of studies is at best mixed
(e.g. Mocan and Tekin 2003, Leete 2001, Ruhm and Borkowski 2003, Preston
1989, Weisbrod 1983). The studies suer from the problem that theoretical
predictions over wage dierentials in the non-prot sector are ambiguous. On
the one hand, people working in non-prot organizations can indeed be
expected to work for a lower wage if they value the job as such. On the other
hand, several forces can work in the reverse. Non-prots may pay higher
wages because they do not have to distribute prots to shareholders, but can
rather distribute them to their employees in the form of inated salaries (rentsharing). Non-prot rms may also have to rely on (higher) eciency wages, to
the extent that the services produced by non-prot employees are particularly
dicult to monitor. Thus, there is reason to believe that wage dierentials do
not necessarily reect the intrinsic utility employees gain from their work in
non-prot organizations.
In this paper, an eort is made to study worker utility in non-prot rms
directly. To our knowledge for the rst time, job satisfaction measures in nonprot and for-prot rms are compared empirically. Economists have long
refrained from using such satisfaction measures, because they have traditionally seen utility as not directly measurable. Over the last years, however, selfreported satisfaction measures like job satisfaction have received increasing
recognition in economics as reliable proxies for utility (see e.g. the survey by
Frey and Stutzer 2002). Thus, worker utility in non-prot and for-prot rms
can be assessed directly by estimating dierences in job satisfaction between the

156

r 2005 Blackwell Publishing Ltd.

WORKER WELL-BEING IN NON-PROFIT FIRMS

two groups. If the theoretical views underlying the donative-labor hypothesis

are correct, employees in non-prot rms should enjoy higher job satisfaction,
because they gain higher intrinsic utility from their work.
The empirical analysis undertaken here takes advantage of two large panel
datasets that include information on whether individuals work in non-prot
rms, an information that is rarely assessed in large-scale surveys. We use four
waves of the National Longitudinal Study of Youth (NLSY) from 1994 to
2000, and nine waves of the British Household Panel Survey (BHPS) from 1991
to 1999. These datasets allow for a representative picture of the relationship
between non-prot work and job satisfaction in the United States and Great
Britain in the 1990s. Moreover, they make it possible to explore the determinants of dierential job satisfaction in detail, as they contain information on
large sets of control variables.
The results of the empirical analysis largely conrm the traditional view on
non-prot rms: employees working in non-prot organizations are more
satised with their jobs than their counterparts in for-prot rms. The result
cannot be attributed to dierences in monetary compensation or fringe benets, and it is robust to individual heterogeneity between non-prot and for-prot
workers, as well as to the fact that non-prot rms are heavily concentrated in
one single industry (the sector of professional and related services). The
evidence thus lends support to the view that non-prot rms oer substantial
non-pecuniary work benets.
The paper is organized as follows: Section II discusses theories of worker
motivation and utility in for-prot and non-prot rms. In Section III, the
datasets used are presented, and Section IV contains the empirical analysis.
Section V shortly discusses implications of the results for the governance of
non-prot rms and oers concluding remarks.

II. WORKER MOTIVATION AND UTILITY IN NON-PROFIT FIRMS:

THEORETICAL VIEWS AND MEASUREMENT APPROACHES
The economic theory of non-prot organizations has frequently noted that the
non-prot sector is likely to have particular requirements for employee
motivation. According to Hansmann (1980), the nature of non-prot production requires employees who are motivated more by the desire to produce a
quality product than by monetary rewards; in fact, the inability of nonprots
to distribute residual earnings (the nondistribution constraint) serves as an
institutional device to attract such employees. Rose-Ackerman (1996) argues
that non-prot organizations often pursue an ideological mission of how a
particular service should be provided (e.g. in religion or education); as a consequence, they rely on individuals that are rather motivated by the ideas or
r 2005 Blackwell Publishing Ltd.

157

MATTHIAS BENZ

vision of an organization than by prot. More generally, Preston (1989) has

described non-prot employees as people who are willing to donate labor to the
production of a public good they nd valuable. A similar argument is made
by Frank (1996), who depicts non-prot organizations as particularly socially responsible, suggesting that many individuals prefer to work for such an
employer. Thus, although specic formulations may dier, theoretical approaches generally stress the role of intrinsic motivation in non-prot rms.
Employees are taken to derive utility not just from monetary reward that compensates them for their work eort; rather, they are seen to enjoy satisfaction
from the work and the work context itself. Non-prot organizations are able to
oer employees a workplace where they can assist in the production of a good
or service in which they nd an intrinsic value.
There is some circumstantial evidence that supports this theoretical view of
work in non-prot organizations. In a study based on the Quality of Employment Survey 1977, Mirvis and Hackett (1983) nd that non-prot employees
are considerably more likely than for-prot workers to state that their work is
more important to them than the money they earn. People employed in nonprot organizations also report more meaningfulness in their work, and they
are less likely to say that their job sometimes requires violating conscience.
A recent survey commissioned by the Brookings Institution in 2002 reports
similar ndings. Non-prot workers state with a higher probability than forprot workers that they can accomplish something worthwhile in their job
(66 percent vs. 41 percent, see Light 2003: 3638). As well, about three out of
four non-prot employees think that their organization is good at helping people, whereas only half of for-prot workers do. Non-monetary work components
thus seem to play a considerable role in non-prot workers own evaluations
of their jobs.
The importance of intrinsic motivation in non-prot organizations also
receives support in a more indirect way. In his economic theory of intrinsic
motivation, Frey (1997) notes that intrinsic motivation is valuable for organizations, but that it is also costly and fragile. Non-prot rms might not only
have to spend resources to carefully select intrinsically motivated employees,
but also nd ways to continuously direct and support their motivation; they
can be expected to rely more on organizational practices and procedures that
strengthen intrinsic motivation to work towards the organizations goals. The
available evidence indeed lends support to this view. The study by Mirvis and
Hackett (1983) mentioned above shows that non-prot employees have
workplaces with more autonomy, task variety and greater inuence on the
job than for-prot employees (see also Preston 1989). These work characteristics have been identied as essential for the nurturing of intrinsic motivation
(for a survey of the psychological literature, see Ryan and Deci 2000). Nonprot organizations have also been found to place more importance on wage

158

r 2005 Blackwell Publishing Ltd.

WORKER WELL-BEING IN NON-PROFIT FIRMS

equity, an organizational practice that is seen to support intrinsic motivation

because it signals fair treatment by the employer (Leete 2000).
In contrast to the theories stressing the special nature of non-prot production and its reliance on intrinsic motivation, there are, however, also different views of the non-prot sector. Critiques of the non-prot form argue that
its existence may have more to do with its favorable tax treatment and the lack
of shareholder pressure than with a genuine role in overcoming failures on the
product market (see e.g. the discussion in Rose-Ackerman 1996: 717f.). In this
view, non-prots do not serve an ecient function, but are rather an alien
element in a for-prot world, surviving only because they are protected by their
special legal status. These arguments imply a very dierent nature of non-prot
employment. They suggest that employees may not nd jobs in non-prot rms
attractive because they can assist in the production of an intrinsically valuable
good; rather, they may do so because they receive better material benets or
enjoy a quiet life.
In fact, the opposing theories of non-prot rms lead to quite ambiguous
predictions about wage dierences between the for-prot and non-prot
sector. If employees in non-prot rms gain intrinsic utility from their job,
one can expect that they are willing to work for a lower wage in exchange for
this valued workplace characteristic. If it is correct, however, that the main
feature of non-prots is their freedom from corporate and property tax, from
cost-cutting pressures by shareholders, and from other regulations, one would
rather expect that non-prot organizations pay higher wages: they can share
some of the resulting rents with their employees in the form of inated salaries
(Feldstein 1971, Borjas et al. 1983, Preston 1989). Higher wages might moreover be paid because the nature of non-prot production makes it dicult
to monitor employees, and therefore higher eciency wages are necessary
to ensure proper work eort (Ito and Domain 1987). This ambiguity of
theoretical predictions is reected to a considerable extent in the empirical
literature. Mocan and Tekin (2003) have found, for example, that non-prot
rms pay higher wages in the child-care sector than for-prot rms; Ruhm and
Borkowski (2003) nd essentially no wage dierence between the sectors, a
result that is also supported by Leete (2000) for an economy-wide comparison
of for-prot and non-prot workers; Leete (2000), however, also shows that in
some industries, a negative wage dierential exists, thus corroborating ndings
of earlier studies that non-prot workers are willing to work for lower wages
than for-prot workers (e.g. Preston 1989, Weisbrod 1983). It seems dicult to
draw a denitive conclusion from these diverse ndings on whether workers in
non-prot rms are intrinsically motivated or not.
Here, a novel approach is undertaken to study utility dierences between
non-prot and for-prot workers. Rather than trying to identify utility indirectly via wage dierentials, an eort is made to assess utility in a direct way,
r 2005 Blackwell Publishing Ltd.

159

MATTHIAS BENZ

by looking at measures of job satisfaction. Job satisfaction has been increasingly used by economists as a meaningful concept to analyze the labor market
(e.g. Hamermesh 1977, Clark and Oswald 1996, Blanchower and Oswald
1999, Lalive 2002, Clark 2003; for a survey see Warr 1999). Its growing use reects
a more general change in economics towards the acceptance of self-reported
satisfaction measures as proxies for utility (Frey and Stutzer 2002). An
advantage of job satisfaction measures is that monetary determinants of
utility (reecting rents or compensating wage dierences) can be controlled
for in the empirical analysis; this makes it possible to study intrinsic, nonmonetary work benets in a direct way, holding the eects of wages and
salaries constant.
III. DATA
The non-prot status of workers is rarely assessed in large-scale socio-economic surveys. Most of the surveys regularly undertaken in western countries
do not comprise a separate category for non-prot employment; rather, employees in non-prot rms are classied together with for-prot employees in the
category private sector employment1. There are, however, two notable exceptions. The rst is the US-American National Longitudinal Study of Youth
(19792000), where in the last four waves of the survey, a new employment
classication was included that assessed non-prot employment separately
(presumably because of the increased importance of the non-prot sector); the
four available waves comprise the years 1994, 1996, 1998 and 2000. Non-prot
status is also assessed in the British Household Panel Survey, a representative
survey of the British population started in 1991. Here, information is available
for nine annual waves that cover the period 19911999.
The National Longitudinal Study of Youth (NLSY) and the British Household Panel Survey (BHPS) can be considered as two of the most renowned and
widely used socio-economic surveys. They contain carefully collected and comprehensive information on representative samples of individuals in their respective countries. The datasets have several advantages for the purposes of this
paper. First, they meet the basic requirement of containing information on nonprot status and job satisfaction at the level of the individual worker. Second,
they extensively cover the area of work, including detailed information on work
related aspects such as income, working hours, occupation, education, industry
and other individual and rm-related characteristics; this information is needed

1. Examples are the General Social Survey or the Panel Study of Income Dynamics in the United States,
and the German Socio-Economic Panel and the European Community Household Panel in Europe.
Non-prot workers are generally included in categories such as works for a private rm, as opposed
to works for the government or is self-employed.

160

r 2005 Blackwell Publishing Ltd.

WORKER WELL-BEING IN NON-PROFIT FIRMS

to study job satisfaction dierences between non-prot and for-prot workers

ceteris paribus, i.e. holding various work-related characteristics constant.
Third, the surveys have a panel structure that can be exploited in the empirical
analysis; individuals can generally be observed over several waves, which
allows one to investigate the important question of what happens to the job
satisfaction of the same individuals when they change jobs from a for-prot to a
non-prot rm. And fourth, the use of surveys from two dierent countries
gives a broader picture of the robustness of empirical results than when just one
country is looked at. Most of the empirical work studying non-prot organizations has used US data only.
Like the dependent variable in the empirical analysis, job satisfaction is used
as a proxy for the utility people derive from their work. In the NLSY, job
satisfaction is assessed using the following question: How (do/did) you feel
about your job with (name of employer)? (Do/Did) you like it very much, like it
fairly well, dislike it somewhat, or dislike it very much? Individuals are asked to
state their job satisfaction on a four point scale, from 1 (dislike it very much) to
4 (like it very much). The question asked in the BHPS is somewhat more direct:
All things considered, how satised or dissatised are you with your present
job overall? Answers are coded here on a broader scale from 1 (not satised at
all) to 7 (completely satised).
In general, individuals in the countries considered seem to be quite satised
with their jobs. In the United States, over the period from 19942000, average
job satisfaction of all individuals in the workforce was 3.39 (st.d. 0.68) on a scale
from 1 to 4. Interestingly, the answers to the job satisfaction question have
almost a binary nature: 48.3 percent of the respondents said that they liked
their job very much, 44.2 percent stated that they liked it fairly well, and only
5.7 percent and 1.8 percent, respectively, indicated that they disliked their job
somewhat or disliked it very much. Following this binary nature of the answers, we will treat the job satisfaction measure in the empirical analysis as a
binary variable, consisting of the categories likes job very much (value 5 1)
and does not like job very much (value 5 0)2. In Britain, from 19911999,
workers indicated an average job satisfaction of 5.43 (st.d. 1.36) on a scale from
17. Here, the original seven point scale is used in the empirical analysis.
As the main purpose of the empirical investigation is to identify utility
dierences between individuals working in non-prot and for-prot rms, the
NLSY and BHPS samples are restricted to employees that either work in a
private for-prot rm or in a private non-prot rm. Thus, all people working in government jobs, self-employed people and those helping in a family
2. This does not aect the qualitative nature of the results presented in the empirical section; however, it
makes the empirical analysis more straightforward in some respects, e.g. when individual xed eects
regressions are estimated.

r 2005 Blackwell Publishing Ltd.

161

MATTHIAS BENZ

business are excluded from the analysis. Moreover, individuals are excluded if
they have not been working recently at the job, and if information on the wage
rate, education, tenure and other control variables is not available. This leaves
us with 16887 observations from 6565 individuals in the case of the NLSY,
and 33445 observations from 9652 individuals in the case of the BHPS3.
Among these individuals employed in the private sector, 9.0 percent are
employed in a non-prot organization in the NLSY, and 4.0 percent in the
BHPS. These gures correspond roughly to those available from other data
sources. Sokolowski and Salamon (1999), for example, estimate the rate of
non-prot employment in the United States to be 7.8 percent of total nonagricultural employment in the year 1995, and data presented in Kendall and
Almond (1999) indicates that, depending on the denition of the non-prot
sector, between 2.2 and 6.3 percent of the total non-agricultural British workforce was employed in non-prot organizations in 19954.

IV. EMPIRICAL ANALYSIS

1. Basic Results
Do non-prot employees derive higher utility from their jobs than for-prot
workers? In Table 1, basic results on the job satisfaction in non-prot and
for-prot rms are presented. The left-hand columns of Table 1 report raw
dierences in job satisfaction between the two sectors in the NLSY and the
BHPS. This gives a rst indication of whether employees in non-prot rms are
on average more satised with their jobs than for-prot workers. In the United
States, from 19942000, 52.9 percent of non-prot workers said that they liked
3. Note that in the case of the NLSY, there is a reduced number of observations for the rst year 1994
(N 5 2775 compared to the following years, where N E 4700). This is because the non-prot /
for-prot status was not assessed for all individuals in the rst year when this new distinction was
introduced in the NLSY (basically the question was asked only for those who had changed employer).
In the following waves, information on non-prot / for-prot employment is available for all
individuals surveyed. Individuals are surveyed on average 2.6 times in either non-prot or for-prot
employment in the NLSY, and 3.5 times in the BHPS.
4. If the share of non-prot employment is compared to total employment, as in these authors
calculations, the datasets used here contain somewhat lower, but still comparable proportions of
third sector employment. Non-prot workers account for 6.8% of all gainfully employed people in
the NLSY, and for 2.6% in the BHPS. In the NLSY, non-prot employees are predominantly
working in the following areas (in descending order of importance): hospitals, elementary and
secondary schools, religious organizations, welfare services, colleges and universities, other health
services, convalescent institutions, and nonprot membership organizations. In the BHPS, the
respective sectors are: social welfare, charitable & community services, tourist oces & other
community services, religious services & other cultural services, trade unions, business & professional
associations, and school education (nursery, primary & secondary).

162

r 2005 Blackwell Publishing Ltd.

WORKER WELL-BEING IN NON-PROFIT FIRMS

Table 1
Job Satisfaction of Non-Prot and For-Prot Employees in the United States and Great Britain
Dependent Variable: Job Satisfaction
Variable

United States

Great Britain

mean job
satisfaction
(binary variable)

logit
regression

mean job
satisfaction
(scale 17)

ordered
logit
regression

Non-prot employee

0.529

For-prot employee

0.443

0.353
(0.070)
reference group

5.69
(1.19)
5.36
(1.36)

0.356
(0.074)
reference group

Hourly wage (log)

Working hours per week
(Working hours)2
Tenure
Tenure2
Age
Age2
Sex (Female)
Working part-time
Education in years
(NLSY) / categ. (BHPS)
2

(Education in years)

Marital status
Ethnic background
Region
Degree of urbanization
Year dummies
No. of observations
No. of individuals
Time period
Chi2

0.478
(0.042)
0.014
(0.006)
0.0002
(0.0000)
0.071
(0.011)
0.002
(0.0006)
0.2101
(0.112)
0.0031
(0.002)
0.226
(0.044)

0.235
(0.032)
0.002
(0.005)
0.0000
(0.0000)
0.029
(0.007)
0.0008
(0.0003)
0.089
(0.009)
0.001
(0.0001)
0.373
(0.038)
0.521
(0.072)

0.063
(0.057)
0.002
(0.002)
3 categ.
4 categ.
4 categ.
3 categ.
4 categ.

12 categ.

16887
6565
19942000
361.32

33445
9652
19911999
1069.08

5 categ.

20 categ.

9 categ.

Notes: Unweighted regressions. Robust standard errors in parentheses (corrected for repeated
observations on individuals). Signicance levels: 10.05 o p o 0.1, 0.01 o p o 0.05, p o 0.01.
Data sources: NLSY 19942000, BHPS 19911999.

their job very much, whereas only 44.3 percent of for-prot workers did; nonprot employees thus are found to be 8 percentage points more likely to have a
high job satisfaction than for-prot employees. A similar picture emerges in the
r 2005 Blackwell Publishing Ltd.

163

MATTHIAS BENZ

BHPS. In Great Britain, over the years from 19911999, people working in
non-prot organizations enjoyed on average a job satisfaction of 5.69 (on a
scale from 1 to 7, st.d. 1.19), compared to an average job satisfaction of forprot workers of 5.36 (st.d. 1.39). Job satisfaction is thus on average 0.33 points
higher in British non-prot rms than in British for-prot rms.
These raw dierences, of course, may reect a multitude of dierences
between non-prot and for-prot work that have nothing to do with intrinsic
motivation or the non-monetary utility non-prot workers get from their work.
For example, as discussed in Section II, non-prot rms may pay higher wages
than for-prot rms, which is likely to aect job satisfaction positively, or nonprot workers may have to work less hours for a given wage, as non-prot rms
do not face the same prot-maximizing pressures as for-prot rms. In order to
account for such dierences between the non-prot and for-prot sector, the
right-hand columns in Table 1 report results from multiple regressions that
control for a basic set of work-related variables. Apart from a variable
indicating whether a worker is employed in a non-prot rm, the regressions
include variables on the individuals wage rate5, hours worked per week
(including overtime), tenure, age, years of education, gender, a set of dummy
variables on the respondents ethnic background, marital status, region of
residence and the place of residences degree of urbanization. In the case of the
NLSY, a logit regression is estimated, as the dependent job satisfaction variable
has a binary nature, and in the case of the BHPS, an ordered logit estimator is
used, because here the dependent variable is ordinally scaled. Both regressions
correct for the fact that individuals are observed repeatedly over time, i.e.
robust standard errors are used to determine the statistical signicance of the
estimated coecients.
The results in Table 1 show that non-prot employees are signicantly more
satised with their work than for-prot employees, even when a range of workrelated variables are controlled for in the empirical analysis. The estimated
coecients for the variable works as a non-prot employee are statistically
highly signicant and of a comparable size as the raw dierences indicated for
both the United States and Great Britain in the respective left-hand columns6.
5. In the NLSY, information on individuals hourly wage rate is provided by the Center of Human
Resource Research, the institute responsible for the survey. The CHRR calculates wage rates from
very detailed information on individuals labor income. In the case of the BHPS, the wage rate is based
on own calculations; an individuals monthly earnings are divided by the hours usually worked per
month.
6. Strictly, the results have to be interpreted by looking at the marginal eects for each variable, as the
estimated coecients of a logit or ordered logit regression do not have any intuitive interpretation. The
marginal eects for the variable non-prot employee, indicating the change of the probability that an
individual is to be found in the highest job satisfaction category, are 8.8% for the United States and
5.5% for Great Britain. Thus, a non-prot employee is 8.8% more likely than a for-prot employee to
like the job very much in the case of the NLSY, and 5.5% more likely to state job satisfaction 5 7 in

164

r 2005 Blackwell Publishing Ltd.

WORKER WELL-BEING IN NON-PROFIT FIRMS

This result shows that the higher job satisfaction of non-prot employees is not
due to dierences in the variables that are included in the regressions. In
particular, non-prot workers higher utility from work cannot be explained by
better material outcomes, like higher wages or lower working hours. The job
satisfaction dierences between non-prot and for-prot workers are not only
statistically, but also economically signicant. If they are compared to the
eects that e.g. wages have on job satisfaction, it can be calculated that wages
for for-prot employees would have to be doubled (in the NLSY) and tripled
(in the BHPS) in order to make for-prot employees as satised as non-prot
workers7.
It is noteworthy to stress that a variable on wages should be included in the
regressions, irrespective of what the theoretical predictions on wage dierentials between the non-prot and for-prot sector are. If there are rents in the
labor market that accrue to non-prot employees, the variable on wages should
be included in the regressions to account for monetary rents that may positively
aect non-prot workers job satisfaction. If, in contrast, the labor market is
suciently competitive and non-prot employees are willing to work for a
lower wage, the variable on wages should also be included in the regression,
because one ought to compare the utilities of two workers that are equally well
paid. A higher job satisfaction for non-prot workers would in this case purely
reect non-monetary benets from work. The results reported in Table 1
suggest that such non-monetary work benets indeed exist in non-prot rms.

2. A Closer Look at the Non-Prot Job Satisfaction Relationship

The empirical analysis undertaken so far has taken a broad look at employees
in private rms, treating non-prot and for-prot employees as a single large
group. The special nature of the non-prot sector, however, suggests that a
closer analysis may be necessary. Besides its legal status, the non-prot sector
distinguishes itself from the for-prot sector in several respects.

the BHPS. While in the case of the NLSY, the marginal eect can directly be compared to the raw job
satisfaction dierence, the magnitude of the marginal eect in the BHPS can more easily be assessed if,
for simplicity, one uses an OLS estimator rather than ordered logit. The estimated coecient for the
variable non-prot employee from an OLS-regression is 0.276 for Great Britain, which is slightly
lower than the raw job satisfaction dierence of 0.33.
7. These estimates have to be considered, without doubt, as implausibly high. It has to be noted, however,
that it is dicult to assess the magnitude of job satisfaction dierences by comparing them to the
eects that wages have on job satisfaction. In a perfectly competitive labor market, the eect of wages
on job satisfaction is expected to be zero, because every increase in non-monetary utility ( job
satisfaction) is compensated by a lower wage (Lalive 2002). Thus, a simple comparison of the nonprot coecient and the wage coecient, as reported above, is very likely to lead to a substantial
overestimation of the implied wage dierential.

r 2005 Blackwell Publishing Ltd.

165

MATTHIAS BENZ

Men and Women in the Non-Prot Sector

One special feature of the non-prot sector is that it employs a particularly high
proportion of women. Among the non-prot employees surveyed in the
NLSY, 67.8 percent were women, while the share of female employment in
for-prot rms was only 44.3 percent. In the BHPS, more than two out of three
non-prot employees were women (70.4 percent), compared to a proportion of
46.2 percent in the for-prot sector. This obvious attractiveness of non-prot
work for women raises the question of whether gender-specic preferences for
non-prot employment exist. It could be, for example, that only women enjoy
utility from the intrinsic benets that non-prot work oers (like the possibility
to help), while men might have preferences for other work characteristics (like
higher incomes). To address this issue, the regressions presented in Table 1 are
run separately for the two groups of men and women. The respective results are
indicated in Table 2.
The ndings reported in Table 2 show that the relationship between job
satisfaction and non-prot work is not a gender-specic phenomenon. Both
men and women enjoy higher utility from work in non-prot rms than their
counterparts in for-prot rms. Men even seem to prot more from being a
non-prot employee, as the larger estimated coecients for both the United
States and Great Britain indicate. Thus, there is little evidence that only women
value the characteristics of non-prot work. In fact, the large proportion of
women in non-prot rms can largely be explained by non-prot rms
concentration in the industry of professional services, a sector that is generally
dominated by female employment8.
Accounting for Personality Characteristics: Fixed Eects Estimates
The argument mentioned above that men and women might have dierent
preferences for non-prot work reects a more general issue: people working
in non-prot rms might be a special selection of individuals with dierent
personality characteristics. This seems not to be implausible: it is likely that
non-prot rms attract e.g. particularly altruistic people. If altruistic people
have a natural tendency to be more satised with their jobs, irrespective of what
employment status they are in, the estimated coecients might not reect
benets from being a non-prot employee, but merely personality dierences
between the two groups of non-prot and for-prot workers. As well, causality
may run in the reverse direction if more happy people are more likely to become

8. In the industry of professional services, non-prot and for-prot rms employ roughly equal shares
of women in both the NLSY and BHPS. See also the subsection The role of industry specic eects on
job satisfaction below, where only this industry is looked at.

166

r 2005 Blackwell Publishing Ltd.

WORKER WELL-BEING IN NON-PROFIT FIRMS

Table 2
Job Satisfaction and Non-Prot Employment: Separate Regressions for Men and Women
Dependent Variable: Job Satisfaction
Variable

Non-prot employee
For-prot employee
Hourly wage (log)
Working hours per week
(Working hours)2
No. of observations
No. of individuals
Time period
Chi2

United States

Great Britain

logit
regression
(men only)

logit
regression
(women only)

ordered logit
regression
(men only)

ordered logit
regression
(women only)

0.464
(0.125)
ref. group
0.481
(0.058)
0.0008
(0.009)
0.0001
(0.0001)

0.307
(0.084)
ref. group
0.515
(0.063)
0.0191
(0.010)
0.00031
(0.0002)

0.555
(0.137)
ref. group
0.399
(0.048)
0.035
(0.009)
0.0002
(0.0000)

0.306
(0.089)
ref. group
0.139
(0.044)
0.016
(0.007)
0.0002
(0.0000)

9052
3412
19942000
205.64

7835
3153
19942000
187.27

17654
4989
19911999
370.25

15791
4663
19911999
650.47

Notes: Unweighted regressions. Robust standard errors in parentheses (corrected for repeated
observations on individuals). In addition to the variables shown, the regressions contain the same
variables as in Table 1 on tenure, age, part-time work, education, marital status, ethnic background,
region, degree of urbanization and year. Signicance levels: 10.05 o p o 0.1, 0.01 o p o 0.05,
p o 0.01.
Data sources: NLSY 19942000, BHPS 19911999.

non-prot employees. Both problems can lead to biased estimates of the nonprot job satisfaction relationship if only a cross-section of workers is looked at.
To account for such concerns, the panel structure of the NLSY and the
BHPS is exploited where persons are observed moving into non-prot employment or out of it. This allows one to follow people over time and investigate
how the job satisfaction of the same people changes when they change their employment status from a for-prot to a non-prot rm and vice versa. Technically, regressions with individual xed eects can be estimated that control for
time-invariant personal characteristics. The results of such xed-eects-regressions for the United States and Great Britain are reported in Table 3. In the case
of the NLSY, a conditional logit regression with xed eects is estimated, and
in the case of the BHPS, an OLS estimator with individual xed eects is
applied9. Otherwise, the same regression specications are used as in Table 1.
9. The analysis for the BHPS is carried out using an ordinary least squares xed eects estimator, because
ordered logit xed eects estimators are not yet commonly available. A new ordered probit xed
eects estimator has been applied to the study of satisfaction e.g. by Ferrer-i-Carbonel and Frijters
(2004).

r 2005 Blackwell Publishing Ltd.

167

MATTHIAS BENZ
Table 3
Job Satisfaction and Non-Prot Employment: Fixed Eects Regressions
Dependent Variable: Job Satisfaction
Variable

Non-prot employee
For-prot employee
Hourly wage (log)
Working hours per week
(Working hours)2
No. of observations
No. of individuals
Time period
Chi2/F

United States

Great Britain

logit regression
(as in Table 1)

conditional logit
regression
(xed eects)

OLS regression
(specication
as in Table 1)

OLS regression
(xed eects)

0.353
(0.070)
ref. group
0.478
(0.042)
0.014
(0.006)
0.0002
(0.0000)

0.399
(0.138)
ref. group
0.588
(0.088)
0.005
(0.008)
0.0001
(0.0001)

0.276
(0.047)
ref. group
0.188
(0.022)
0.0071
(0.005)
0.0000
(0.0000)

0.394
(0.070)
ref. group
0.213
(0.026)
0.0061
(0.003)
0.0000
(0.0000)

16887
6565
19942000
361.32

7769
2483
19942000
170.54

33445
9652
19911999
20.07

33445
9652
19911999
11.84

Notes: Unweighted regressions. Standard errors in parentheses (corrected for repeated observations
on individuals in the respective left-hand columns). For the conditional logit regression (NLSY),
the sample size is smaller, because the estimator only takes individuals into account whose job
satisfaction at least changes once. In addition to the variables shown, the regressions contain the same
variables as in Table 1 on tenure, age, part-time work, education, marital status, ethnic background,
region, degree of urbanization and year. Signicance levels: 10.05 o p o 0.1, 0.01 o p o 0.05,
p o 0.01.
Data sources: NLSY 19942000, BHPS 19911999.

Table 3 indicates that the non-prot job satisfaction relationship is largely

a robust phenomenon. People who experience both for-prot and non-prot
employment are on average more satised with their jobs when they are working for a non-prot rm than when they are employed in a for-prot rm. The
estimated coecients for the variable works as a non-prot employee are of a
comparable magnitude to those reported in Table 1, and they are statistically
signicant for both the United States and Great Britain. Thus, the non-prot
job satisfaction eect cannot be explained by systematically dierent personality characteristics between employees in the two sectors. Rather, the results
suggest that non-prot work is institutionally dierent than for-prot work,
providing employees with the possibility to enjoy intrinsic benets from work10.
10. Note that the results presented here do not mean that every person picked at random from the
population of employees would be more satised with the job in a non-prot rm. The xed-eectregressions account for time-invariant personality characteristics, but they do not rule out the
argument that only some people have a preference for the characteristics of non-prot work. With an

168

r 2005 Blackwell Publishing Ltd.

WORKER WELL-BEING IN NON-PROFIT FIRMS

The Role of Industry Specic Eects

A third peculiarity of the non-prot sector is that it is highly concentrated in one
single industry. In the NLSY, 83.4 percent of the surveyed non-prot workers
are employed in the industry professional and related services. A similar share
is found in the BHPS, where four out of ve non-prot employees are working
in the industry other services (80.4 percent). These numbers do not come as a
surprise. The industry categories professional and related services and other
services encompass areas such as health care (hospitals, nursing homes and
other medical care institutions), education, research and development, charitable and community services, religious services, arts institutions (museums,
orchestras, libraries) and professional associations. These are areas where
non-prot organizations have traditionally played an important role, whereas
they hardly exist in industries like manufacturing, construction or trade. This
characteristic makes it questionable whether non-prot and for-prot workers
can be broadly compared on an economy-wide basis. Potentially, non-prot
workers are only more satised with their jobs because they predominantly
work in an industry where job satisfaction is generally high. It thus seems
warranted to take a closer look at the professional services industry only, in
order to further investigate the robustness of the non-prot job satisfaction
relationship.
In Table 4, the samples of the NLSY and the BHPS are narrowed to those
individuals that work in the industries professional and related services and
other services, respectively. Among the people employed in these industries,
38.1 percent worked for a non-prot rm in the NLSY, and 26.9 percent in the
BHPS. The regressions reported in Table 4 indicate whether these individuals
were more satised with their jobs than their counterparts employed in forprot rms in the same industry. The regressions contain the same variables
as those in Table 1. In addition, we also include a set of control variables on
dierent occupation categories, in order to account for potential occupation
specic determinants of job satisfaction11.
The results reported in Table 4 show that the non-prot job satisfaction
relationship is to some extent an industry specic eect. The estimated coecients for the variable works as a non-prot employee are considerably smaller

economy-wide share of non-prot employment far below 10 percent, it seems unlikely that most
employees would be better o in a non-prot rm; one would expect to see more supply of non-prot
work if that were the case. That said, the argument nevertheless remains that non-prot work seems
to be institutionally dierent than for-prot work, providing a class of employees with the possibility
to derive intrinsic benets from work.
11. The regressions include 9 occupation categories in the case of the NLSY (e.g. professional, technical
and kindred workers, managers, ocials and proprietors, sales workers, etc.), and 12 occupation
categories in the BHPS.

r 2005 Blackwell Publishing Ltd.

169

MATTHIAS BENZ
Table 4
Job Satisfaction and Non-Prot Employment: Restricted Samples of Professional Services Workers
Dependent Variable: Job Satisfaction
Variable

Non-prot employee
For-prot employee
Hourly wage (log)
Working hours per week
(Working hours)2
No. of observations
No. of individuals
Time period
Chi2

United States

Great Britain

logit regression logit regression

(as in Table 1) (restricted sample)

ordered logit
ordered logit
regression
regression
(as in Table 1) (restricted sample)

0.353
(0.070)
ref. group
0.478
(0.042)
0.014
(0.006)
0.0002
(0.0000)

0.1481
(0.089)
ref. group
0.200
(0.089)
0.0191
(0.010)
0.0002
(0.0001)

0.356
(0.074)
ref. group
0.235
(0.032)
0.002
(0.005)
0.0000
(0.0000)

0.252
(0.099)
ref. group
0.199
(0.082)
0.027
(0.011)
0.0003
(0.0001)

16887
6565
19942000
361.32

3290
1559
19942000
84.88

33445
9652
19911999
1069.08

3941
1799
19911999
357.95

Notes: Unweighted regressions. Robust standard errors in parentheses (corrected for repeated
observations on individuals). In addition to the variables shown, the regressions contain the same
variables as in Table 1 on tenure, age, part-time work, education, marital status, ethnic background,
region, degree of urbanization and year, and also information on occupation categories not
contained in Table 1. Signicance levels: 10.05 o p o 0.1, 0.01 o p o 0.05, p o 0.01.
Data sources: NLSY 19942000, BHPS 19911999.

than those found in an economy-wide comparison (Table 1), indicating that

non-prot rms mainly operate in an industry where job satisfaction is on
average higher than in other industries. Nevertheless, statistically signicant
dierences between non-prot and for-prot workers are found also for the
reduced, industry-specic samples. In both the NLSY and the BHPS, nonprot employees are found to be more satised with their jobs than for-prot
workers in the same industry sector (marginally signicantly so in the American case, po0.1, and signicantly so in Great Britain, po0.05).
Fringe Benets in Non-Prot Organizations
Do the results presented so far show that non-prot rms provide jobs rich in
intrinsic work benets? An alternative explanation of high job satisfaction
among non-prot workers is that non-prot rms rather compensate their
employees with non-wage services, such as generous fringe benets. In fact,
fringe benets may be an attractive form of compensation for non-prot rms.
If the view is correct that non-prot organizations can share rents with their

170

r 2005 Blackwell Publishing Ltd.

WORKER WELL-BEING IN NON-PROFIT FIRMS

employees, it may be easiest to do so in the form of non-wage compensation.

While inated wages are likely to meet the scrutiny of donors and customers,
because they are easy to compare between rms and sectors, fringe benets are
relatively intransparent and can be justied as socially progressive. Thus, nonprot rms may be particularly generous with their employees in the area of nonwage compensation, which is likely to aect their job satisfaction positively.
The NLSY contains some information on employees fringe benets that
allows to address the question whether non-prot workers job satisfaction is
due to advantages in non-wage compensation (there is unfortunately no
information available for the BHPS). Descriptive statistics show that nonprot employees are indeed more likely to receive fringe benets from their
employers. For example, in the sector of professional and related services,
87.0 percent of non-prot workers are oered health insurance by their
employer, compared to 80.4 percent of for-prot employees. Similar numbers
apply to life insurance (78.0 percent vs. 66.9 percent), dental insurance (77.1
percent vs. 64.2 percent), maternity leave (80.7 percent vs. 76.1 percent),
employer-provided pension plans (77.8 percent vs. 67.6 percent), training (73.6
percent vs. 61.5 percent) and child care (20.0 percent vs. 14.4 percent), while
there are no dierences in the areas of exible work schedules (63.1 percent vs.
62.6 percent) and the number of vacation days (14.2 vs. 13.2). In Table 5,
information on these fringe benets is included in the regression, in order to
investigate whether they explain the higher job satisfaction of non-prot
employees in the NLSY12.
The ndings reported in Table 5 indicate that non-prot employees aboveaverage fringe benets do not account for their particular job satisfaction: the
coecient on the variable works as a non-prot employee retains its
magnitude and statistical signicance. This is so because the provision of
fringe benets, somewhat surprisingly, does not aect the job satisfaction of
workers in a systematic way. While some fringe benets, like companyprovided child care or exible work schedules, aect job satisfaction positively,
others exert no eect, or even depress job satisfaction. In any event, the results
show that non-prot workers higher job satisfaction cannot be explained by
the better non-wage benets oered by non-prot rms.
To summarize the ndings, there seems to be suciently robust evidence that
non-prot workers experience particular satisfaction from their jobs. The
result of higher worker well-being in non-prot rms cannot be attributed to
dierences in monetary compensation or fringe benets, and it is robust to
individual heterogeneity between non-prot and for-prot workers, as well as
12. Information is included in the form of dummy variables for the respective fringe benets, indicating
whether an individual is oered the particular benet by his or her employer. As there is some missing
information on these variables, the sample size in Table 5 is lower than in Table 4.

r 2005 Blackwell Publishing Ltd.

171

MATTHIAS BENZ
Table 5
Job Satisfaction and Non-Prot Employment: Accounting for the Role of Fringe Benets
in the NLSY
Dependent Variable: Job Satisfaction
Variable

Non-prot employee
For-prot employee

United States
logit regression
(as in Table 4)

logit regression
(with variables on fringe benets)

0.1481
(0.089)
ref. group

0.1891
(0.098)
ref. group

0.200
(0.089)

0.229
(0.171)
0.309
(0.140)
0.095
(0.130)
0.029
(0.125)
0.069
(0.132)
0.250
(0.094)
0.158
(0.105)
0.385
(0.126)
0.0003
(0.002)
0.222
(0.102)

3290
1559
19942000
84.88

2708
1369
19942000
128.67

Provision of fringe benets

Health insurance
Life insurance
Dental insurance
Maternity leave
Pension plan
Flexible work schedules
Training
Child care
Number of vacation days
Hourly wage (log)
No. of observations
No. of individuals
Time period
Chi2

Notes: Unweighted regressions. Robust standard errors in parentheses (corrected for repeated
observations on individuals). In addition to the variables shown, the regressions contain the same
variables on work hours, tenure, age, sex, education, occupation, marital status, ethnic background,
region, degree of urbanization and year dummies as in Table 4. Signicance levels: 10.05 o p o 0.1,
0.01 o p o 0.05, p o 0.01.
Data source: NLSY 19942000.

to the fact that non-prot rms are heavily concentrated in one single industry.
The most likely explanation of the evidence seems to be that non-prot rms
oer substantial non-pecuniary work benets.
The results reported in this paper, however, should be qualied in two
respects. First, we have not oered an empirical test that would directly conrm the underlying hypothesis. Such a test could, for example, consist in an

172

r 2005 Blackwell Publishing Ltd.

WORKER WELL-BEING IN NON-PROFIT FIRMS

attempt to fully explain the job satisfaction dierential between non-prot and
for-prot workers by their subjective evaluations of how useful the job is for
society or how much one can help other people in this job (for an example
of such an empirical strategy, see Benz and Frey 2003). Second, alternative
explanations of the results remain possible, e.g. that non-prot workers have
less stress-related experiences at work, beyond the numbers of hours they work
(but see e.g. Light 2003). The datasets used unfortunately do not contain the
variables required to address these issues. Future work might be able to explore
the reasons behind the non-prot job satisfaction dierential in more detail
than has been possible here.

V. CONCLUDING REMARKS
In this paper, an old notion about non-prot organizations is tested in a novel
way. There is a long tradition that sees non-prot rms as places where employees not only enjoy satisfaction from the paycheck they get, but also from the
work they do itself. Economists have traditionally investigated this phenomenon
by looking at compensating wage dierentials, seeking evidence that non-prot
employees are willing to work for lower wages in exchange for the intrinsically
valued qualities of their workplaces. Here, for the rst time, measures of job
satisfaction are used to compare the utilities of non-prot and for-prot
employees. The empirical results show that in both the United States and Great
Britain over the 1990s, non-prot workers were generally more satised with
their jobs than for-prot workers, a nding that is dicult to explain by
material dierences between the sectors, but is consistent with the view that
non-prot rms oer substantial intrinsic work benets.
What consequences do the results presented in the empirical analysis have for
the governance of non-prot rms? In order to conclude, we wish to argue that
they can inform ongoing discussions on the non-prot form by highlighting
advantages of non-prot rms that have rather been forgotten or downplayed
in recent years. Probably the most important development that the non-prot
sector has experienced over the last decade, especially in the United States, is a
strong tendency to introduce concepts taken from the business sector. This
trend has come in dierent facets. On the one hand, non-prot rms have
become more commercially oriented over the 1990s (for an overview, see
Weisbrod 1997, 1998); the boundaries between the non-prot and the for-prot
sector have thereby become increasingly blurred. On the other hand, many nonprot rms have started to base their human resources policies on approaches
applied in the for-prot sector, in particular by introducing pay-for-performance schemes (e.g. Arnould, Bertrand and Hallock 2000). Both developments
bring non-prot rms closer to being like for-prot organizations.
r 2005 Blackwell Publishing Ltd.

173

MATTHIAS BENZ

The results presented in this paper, however, make it questionable whether

non-prot rms should be run as if they were a private business organization.
People working in non-prot rms seem to be motivated by more than just
monetary concerns, and they specically value the working conditions oered
by non-prot rms, which results in a high job satisfaction. This characteristic
is likely to get lost once dierences between non-prot and for-prot rms
disappear, with potentially detrimental consequences for employee motivation
and the functioning of the non-prot sector. The governance of non-prot
organizations thus may gain by not pushing the view too far that for-prot
sector management policies are also best-practice for non-prot rms. In
contrast, non-prot organizations seem to have a competitive advantage in
motivating and satisfying their workers, an asset that they may nd worthwhile
to preserve.
On average, non-prot rms still seem to understand this. For example, despite current trends, non-prot rms continue to rely less on pay-for-performance plans to motivate employees than for-prot rms. Data contained in the
NLSY shows that in the years from 1996 to 2000, 10.2 percent of non-prot
workers in the professional services sector received some kind of performance
pay (mainly bonuses), while 17.0 percent of for-prot employees did so (see also
Ballou and Weisbrod 2003). Interestingly, one may even argue that the forprot sector increasingly gains insights into how to raise workers satisfaction
and motivation by adopting procedures and organizational principles applied
in non-prot rms. The recent successes of open source software projects like
Linux, which deliberately apply a not-for-prot approach to their business,
highlight the potential of the non-prot form in knowledge- and innovationbased industries (see e.g. Franck and Jungwirth 2003, Osterloh et al. 2003,
Economist 2004).

REFERENCES
Arnould, Richard, Marianne Bertrand and Kevin F. Hallock (2000). Does Managed Care Change
the Mission of Nonprot Hospitals? Evidence from the Managerial Labor Market. National
Bureau of Economic Research, Working Paper No. 7924.
Ballou, Jerey P. and Burton A. Weisbrod (2003). Managerial Rewards and the Behavior of
For-Prot, Governmental, and Nonprot Organizations: Evidence from the Hospital Industry,
Journal of Public Economics. 87(9): 18951920.
Benz, Matthias and Bruno S. Frey (2003). The Value of Autonomy: Evidence from the
Self-Employed in 23 Countries. Institute for Empirical Research in Economics, Working Paper
No. 173.
Blanchower, David G. and Andrew J. Oswald (1999). Well-Being, Insecurity and the Decline of
American Job Satisfaction. Working Paper, University of Warwick.
Borjas, George J., H.E. Frech and Paul B. Ginsburg (1983). Property Rights and Wages: The Case of
Nursing Homes, Journal of Human Resources. 18(2): 23146.

174

r 2005 Blackwell Publishing Ltd.

WORKER WELL-BEING IN NON-PROFIT FIRMS

Clark, Andrew E. (2003). Looking for Labor Market Rents With Subjective Data. Working Paper,
DELTA, Paris.
Clark, Andrew E. and Andrew J. Oswald (1996). Satisfaction and Comparison Income, Journal of
Public Economics. 61(3): 359381.
Economist (2004). An Open-Source Shot in the Arm?, The Economist Technology Quarterly. June 12,
371(8379): 1719.
Feldstein, Martin S. (1971). The Rising Cost of Hospital Care. Washington, DC: Information
Resources Press.
Ferrer-i-Carbonell, Ada and Paul Frijters (2004). How important is methodology for the estimates of
the determinants of happiness?, Economic Journal. 114(497): 641659.
Franck, Egon and Carola Jungwirth (2003). Reconciling Rent-seekers and Donators The
Governance Structure of Open Source, Journal of Management and Governance. 7(4): 40121.
Francois, Patrick (2001). Employee Care and the Role of Nonprot Organizations, Journal of
Institutional and Theoretical Economics. 157(3): 44364.
Frank, Robert H. (1996). What Price the High Moral Ground?, Southern Economic Journal. 63(1):
117.
Frey, Bruno S. (1997). Not Just for the Money: An Economic Theory of Personal Motivation.
Cheltenham: Edward Elgar.
Frey, Bruno S. and Alois Stutzer (2002). What Can Economists Learn from Happiness Research?,
Journal of Economic Literature. 40(2): 402435.
Glaeser, Edward L. (ed.) (2003). The Governance of Not-For-Prot Organizations. Chicago:
University of Chicago Press.
Glaeser, Edward L. and Andrei Shleifer (2001). Not-for-Prot Entrepreneurs, Journal of Public
Economics. 81(1): 99115.
Hamermesh, Daniel (1977). Economic Aspects of Job Satisfaction, in: Ashenfelter, Orley and
Wallace Oates (eds.), Essays in Labor Market Analysis. New York: John Wiley.
Hansmann, Henry B. (1980). The Role of Nonprot Enterprise, Yale Law Journal. 89(5): 835901.
Ito, Takathosi and Dale Domain (1987). A Musical Note on the Eciency Wage Hypothesis
Programmings, Wages and Budgets of American Symphony Orchestras, Economics Letters.
25(1): 9599.
Kendall, Jeremy and Steven Almond (1999). United Kingdom, in: Salamon, Lester M. et al. (eds.),
Global Civil Society: Dimensions of the Nonprot Sector. Baltimore: Johns Hopkins Center for
Civil Society Studies, 179199.
Lalive, Rafael (2002). Do Wages Compensate for Workplace Amenities?, Working paper, Institute
for Empirical Research in Economics, University of Zurich.
Leete, Laura (2000). Wage Equity and Employee Motivation in Nonprot and For-Prot
Organizations, Journal of Economic Behavior and Organization. 43(4): 42346.
Leete, Laura (2001). Whither the Nonprot Wage Dierential? Estimates from the 1990 Census,
Journal of Labor Economics. 19(1): 13670.
Light, Paul C. (2003). The Health of the Human Services Workforce. Center for Public Service,
Brookings Institution.
Mirvis, Phillip H. and Edward J. Hackett (1983). Work and work force characteristics in the
nonprot sector, Monthly Labor Review. 116(4): 312.
Mocan, Naci H. and Erdal Tekin (2003). Nonprot Sector and Part-Time Work: An Analysis of
Employer-Employee Matched Data on Child Care Workers, Review of Economics and Statistics.
85(1): 3850.
Osterloh, Margit, Sandra Rota and Bernhard Kuster (2003). Open Source Software Production:
Climbing on the Shoulders of Giants. Working Paper, University of Zurich.
Preston, Anne E. (1989). The Nonprot Worker in a For-Prot World, Journal of Labor Economics.
7(4): 43863.

r 2005 Blackwell Publishing Ltd.

175

MATTHIAS BENZ
Rose-Ackerman, Susan (1996). Altruism, Nonprots, and Economic Theory, Journal of Economic
Literature. 34(2): 701728.
Ruhm, Christopher J. and Carey Borkowski (2003). Compensation in the Nonprot Sector, Journal
of Human Resources. 38(4): 9921021.
Ryan, Richard M. and Edward L. Deci (2000). The What and Why of Goal Pursuits: Human
Needs and the Self-determination of Behavior, Psychological Inquiry. 11(4): 227268.
Sokolowski, Wojciech S. and Lester M. Salamon (1999). The United States, in: Lester M. Salamon
et al. (eds.), Global Civil Society: Dimensions of the Nonprot Sector. Baltimore: Johns Hopkins
Center for Civil Society Studies, 261281.
Warr, Peter (1999). Well-Being and the Workplace, in: Daniel Kahneman, Ed Diener and Norbert
Schwarz (eds.), Well-Being: The Foundations of Hedonic Psychology. New York: Russell Sage
Foundation, 392412.
Weisbrod, Burton A. (1983). Nonprot and Proprietary Sector Behavior: Wage Dierentials among
Lawyers, Journal of Labor Economics. 1(3): 246263.
Weisbrod, Burton A. (1988). The Nonprot Economy. Cambridge: Harvard University Press.
Weisbrod, Burton A. (1997). The Future of the Nonprot Sector: Its Entwining with Private
Enterprise and Government, Journal of Policy Analysis and Management. 16(4): 541551.
Weisbrod, Burton A. (1998). To Prot or Not to Prot: The Commercial Transformation of the
Nonprot Sector. New York: Cambridge University Press.

SUMMARY
Non-prot rms are often seen as workplaces where people not only work for money, but also nd
substantial satisfaction in the kind of work they do. Studies looking at compensating wage dierentials,
however, have only found limited support for this notion. In this paper, a novel approach is undertaken to
compare the utilities of non-prot and for-prot employees, by using measures of job satisfaction. The
results show that in both the United States and Great Britain over the 1990s, non-prot workers were
generally more satised with their jobs than for-prot workers. The robustness of the results is explored in
detail, and implications for the governance of non-prot rms are shortly discussed.

176

r 2005 Blackwell Publishing Ltd.