Organizational form, prosocial motivation and provision of public services

This thesis is a collection of three essays that are concerned with the role of organizational form and intrinsic motivation in the delivery of public services. The first essay revisits one of the most influential among the economic theories of nonprofit organizations, the "contractual failures" theory, which argues that consumers perceive nonprofit status--because of the constraint in the distribution of surpluses--as a commitment device, which ensures them against opportunistic behaviour in markets that are characterized by contractual incompleteness in the producer/consumer relationship. This paper questions the robustness of this theory by taking into account the role of reputation. The main result is that when reputations can be sustained, then for-profit status is the preferred organizational form and high quality services are ensured. The second essay provides an explanation for the fact that nonprofit employers are uniquely able to attract volunteers with social concerns and career aspirations and for the related observation that nonprofits figure prominently in mission-related activities. Our theory is predicated on that nonprofit incorporation relaxes the incentive constraint that employers face when implicitly contracting with volunteers. The not-for-profit commitment is shown to be effective only in activities where producers, who can choose to be for-profit or nonprofit, care about the level or quality of the service being provided. Thus, in the equilibrium of the model developed here nonprofit entry in sectors where missions play a defining role and the hiring of volunteers arise endogenously due to economic forces. This equilibrium outcome has some desirable welfare properties. The third essay, co-authored with Patrick Francois, provides a selective overview high-lighting some major themes of the recent literature on the role of intrinsic motivation in the context of the provision of social services. We focus on how the presence of intrinsic motivation affects the design of optimal incentives, the selection of motivated agents, and how prosociality interacts with monetary rewards and organizational form. We also discuss some of the recent literature that addresses issues of organizational design for the provision of public services.Arts, Faculty ofVancouver School of EconomicsGraduat