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Handbook of Research on Nonprofit Economics and Management HANDBOOK OF RESEARCH ON NONPROFIT ECONOMICS AND MANAGEMENT Handbook of Research on Nonprofi t Economics and Management Edited by Bruce A. Seaman Associate Professor of Economics, Core Faculty member, Nonprofi t Studies Program, and Affi liated Faculty member, Fiscal Research Center, Andrew Young School of Policy Studies, Georgia State University, USA and Dennis R. Young Bernard B. and Eugenia A. Ramsey Professor of Private Enterprise and Director, Nonprofi t Studies Program, Andrew Young School of Policy Studies, Georgia State University, USA Edward Elgar Cheltenham, UK • Northampton, MA, USA © Bruce A. Seaman and Dennis R. Young 2010 All rights reserved. No part of this publication may be reproduced, stored in a retrieval system or transmitted in any form or by any means, electronic, mechanical or photocopying, recording, or otherwise without the prior permission of the publisher. Published by Edward Elgar Publishing Limited The Lypiatts 15 Lansdown Road Cheltenham Glos GL50 2JA UK Edward Elgar Publishing, Inc. William Pratt House 9 Dewey Court Northampton Massachusetts 01060 USA A catalogue record for this book is available from the British Library Library of Congress Control Number: 2009937756 ISBN 978 1 84720 358 8 (cased) Printed and bound by MPG Books Group, UK 02 Contents List of contributors vii Foreword by James Alm xi Acknowledgments xiv List of abbreviations xv Introduction: the frontiers of economics and nonprofi t management research 1 Bruce A. Seaman and Dennis R. Young 1 Income diversifi cation 5 Cyril F. Chang and Howard P. Tuckman 2 Revenue interactions: crowding out, crowding in, or neither? 18 Daniel Tinkelman 3 Distribution policies of private foundations 42 Richard Sansing 4 Capital formation 59 Robert J. Yetman 5 Asset composition 69 Woods Bowman 6 Collaboration versus competition in the third sector 83 Renée A. Irvin 7 Markets with competition between for-profi t and nonprofi t fi rms 96 Eleanor Brown 8 Nonprofi t wages: theory and evidence 106 Anne E. Preston and Daniel W. Sacks 9 Modeling nonprofi t behavior 120 Patricia Hughes and William Luksetich 10 Pricing strategies 142 Bruce A. Seaman 11 Nonprofi ts and the value of risk management 156 Martin F. Grace 12 Contracting out 169 Salvatore Alaimo 13 Product diversifi cation and social enterprise 195 Sharon M. Oster v vi Contents 14 Internal organization and governance 208 Vladislav Valentinov 15 Franchises and federations: the economics of multi-site nonprofi t organizations 220 Dennis R. Young and Lewis Faulk 16 The valuation of volunteer labor 238 Laura Leete 17 Assessing nonprofi t performance 249 Joseph J. Cordes and Katherine Coventry 18 Social accounting for value creation in nonprofi ts 263 Laurie Mook and Femida Handy 19 Certifi cation and self-regulation of nonprofi ts, and the institutional choice between them 280 Andreas Ortmann and Jan Myslivecek 20 Federal tax policy 291 Michael Rushton 21 The property tax exemption for nonprofi ts 303 David L. Sjoquist and Rayna Stoycheva 22 Government funding policies 320 Stefan Toepler Index 335 Contributors Salvatore Alaimo, PhD, is Assistant Professor of Public and Nonprofi t Administration at Grand Valley State University, Grand Rapids, Michigan and a consultant for nonprofi t organizations. James Alm, PhD, is Professor of Economics in the Andrew Young School of Policy Studies at Georgia State University. His research has focused on various issues in public economics, including tax compliance, the marriage tax, and taxpayer responses to taxes. He has also worked extensively on fi scal and decentralization reforms in numerous coun- tries. Previously, he has served as Chair of the Department of Economics in the Andrew Young School of Policy Studies and as Dean of the School. He is currently editor of Public Finance Review. Woods Bowman, PhD, is Professor of Public Service Management at DePaul University, Chicago. Before joining the DePaul faculty he served as Chief Financial Offi cer of Cook County and interim Executive Director of Goodwill Industries of Metropolitan Chicago. Eleanor Brown, PhD, is James Irvine Professor of Economics at Pomona College, California, and editor of the Nonprofi t and Voluntary Sector Quarterly. Her research interests include resource allocation in the absence of profi t-maximizing behavior, through private philanthropy, volunteer labor, government, nonprofi t organizations, and within the family. Cyril F. Chang, PhD, is Suzanne Downs Palmer Professor of Economics at the Fogelman College of Business and Economics, University of Memphis, Tennessee, where he is also the Director of the Methodist Le Bonheur Center for Healthcare Economics. Joseph J. Cordes, PhD, is Professor of Economics, Public Policy, and Public Administration in the Trachtenberg School of Public Policy and Public Administration at George Washington University, Washington, DC, and an Associate Scholar in the Center on Nonprofi ts and Philanthropy at the Urban Institute, Washington, DC. Katherine Coventry is a PhD candidate at the Trachtenberg School of Public Policy and Public Administration at George Washington University. Lewis Faulk is a PhD candidate in Public Policy at Georgia State University and the Georgia Institute of Technology in Atlanta, Georgia. He is a graduate research assist- ant in the Nonprofi t Studies Program at the Andrew Young School of Policy Studies at Georgia State University. Martin F. Grace, PhD, is the James S. Kemper Professor of Risk Management and Associate Director and Research Associate of the Center for Risk Management and Insurance Research at Georgia State University. He is a former President of The Risk Theory Society and is a current associate editor of the Journal of Risk and Insurance. vii viii Contributors Femida Handy, PhD, is Professor of Social Policy and Practice at the University of Pennsylvania. Her research interests include nonprofi t entrepreneurship and volunteer- ism, comparative and international aspects of the nonprofi t and voluntary sector, and social accounting. Patricia Hughes, PhD, is Professor of Economics at St Cloud State University, Minnesota. She is currently Director of the Graduate Program of Public and Nonprofi t Institutions at SCSU. Her research interests focus on effi ciency, funding, and manage- ment of nonprofi t and government organizations. Renée A. Irvin, PhD, is Associate Professor of Planning, Public Policy and Management at the University of Oregon, where she directs the university’s Graduate Certifi cate in Nonprofi t Management Program. Her research centers on nonprofi t economics and management, philanthropy and wealth policy. Laura Leete, PhD, is Assistant Professor and Director of the Undergraduate Program for the Department of Planning, Public Policy and Management at the University of Oregon. Her research interests include workforce development policy and labor market institu- tions; poverty and social policy; nonprofi t economics and nonprofi t labor markets. William Luksetich, PhD, is Professor of Economics at St Cloud State University, Minnesota. He has done research in the areas of the economics of nonprofi ts, cultural economics, effi ciency of fundraising activities, the determinants of the number of non- profi ts across states, and the economics of crime. His current research involves the meas- urement of economic freedom and its relation to economic welfare, political and religious determinants of charitable contributions, and the effi ciency of sports gaming markets. Laurie Mook, PhD, is Director of the Social Economy Centre of the University of Toronto. His research focuses on social and environmental accounting, social economy organizations, and volunteerism. Jan Myslivecek received his PhD in 2009 at CERGE-EI, an economic program in Prague, Czech Republic. His research focused on theoretical aspects of quality assur- ance methods, mainly certifi cation and self-regulation. He is currently working for The Boston Consulting Group as a Senior Analyst. Andreas Ortmann, PhD, is Professor of Experimental and Behavioural Economics in the Australian Business School at the University of New South Wales, Sydney. He is also a Research Associate at the Centre for Social Impact at the same school. He is interested in the origin and evolution of languages, moral sentiments, and organizations. Sharon M. Oster, PhD, is Dean and Frederic D. Wolfe Professor of Management and Entrepreneurship at the Yale School of Management. A specialist in competitive strat- egy, microeconomic theory, industrial organization, the economics of regulation and antitrust, and nonprofi t strategy, she has written extensively on the regulation of busi- ness and competitive strategy. Anne E. Preston, PhD, is Department Chair and Professor of Economics at Haverford College, Philadelphia. Her research interests include labor economics, applied econometrics, macroeconomics, and experimental and behavioral economics. Contributors ix Michael Rushton, PhD, is Director of Arts Administration Programs in the School of Public and Environmental Aff airs at Indiana University, and co-editor of the Journal of Cultural Economics. Daniel W. Sacks, is a PhD student in Applied Economics at the Wharton School of the University of Pennsylvania. Richard Sansing, PhD, is Professor of Accounting at the Tuck School of Business at Dartmouth in Hanover, New Hampshire. He has published papers in the nonprofi t area concerning the unrelated business income tax and the tax rules that aff ect private foundations. Bruce A. Seaman, PhD, is Associate Professor of Economics and
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