The implementation of social policy through the nonprofit sector: a political market framework

The uneven geographic distribution of nonprofit organizations has been an issue of debate in the implementation of social policy since the 1980s. This paper proposes a political market framework to test an integrated explanation for the geographic distribution of nonprofits. Government failure theory attributes this variation to the distribution of social problems, so that nonprofit organizations are more prevalent in jurisdictions displaying larger and more diverse service needs that governments are not prepared or willing to tackle. In contrast, entrepreneurship theory argues that nonprofit organizations are created in jurisdictions with higher levels of prosperity and resources and a stronger tradition of generosity. This second explanation suggests that nonprofit organizations are established by entrepreneurs seeking to maximize non-monetary returns. Our framework argues that both demand-side and supply-side market forces help to explain the variation in the geographical distribution of nonprofit organizations. The hypotheses are tested using data assembled from nonprofit organizations established at the local level in continental Portugal. The variation in nonprofit sector activities is measured by the number of users and by the number of nonprofit organizations operating by block groups responsible for the implementation of social policy in each local jurisdiction. These groups constitute our dependent variables and include nursing homes, day care centers, home care organizations, leisure centers, and homeless care organizations. The paper employs a series of economic, social and demographic features of the local jurisdictions as explanatory factors to test the propositions derived from the political market framework for the formation and size of nonprofit organizations. Our findings indicate that citizen donations, demand heterogeneity, income, and population size are relevant predictors of the dimension of the local nonprofit sector