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Why Are Promotions Less Likely in Nonprofit Firms?

Author

Listed:
  • Jed DeVaro

    (Cornell University)

  • Dana Samuelson

    (Cornell University)

Abstract
We use data from the Multi-City Study of Urban Inequality (MCSUI) employer survey to document a new empirical finding that workers are less likely to receive promotions in nonprofit firms than in for-profit firms. We propose an incentives-based explanation for this result and offer empirical evidence that is consistent with our hypothesis. At the heart of our explanation is a tradeoff between the incentive-provision and job-assignment roles of promotions. While for-profit firms must rely on promotions to serve both purposes, presumably achieving neither perfectly, we argue that nonprofits have the luxury of using promotions predominantly to achieve optimal job assignment. We conjecture that incentive creation may be less of a concern in nonprofit firms, where workers self-select and are often intrinsically motivated by interest in the firm’s output, thus allowing promotions to be used mainly to achieve efficient job assignments.

Suggested Citation

  • Jed DeVaro & Dana Samuelson, 2005. "Why Are Promotions Less Likely in Nonprofit Firms?," Labor and Demography 0501010, University Library of Munich, Germany.
    • Handle: RePEc:wpa:wuwpla:0501010
    Note: Type of Document - doc; pages: 45
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    References listed on IDEAS

    as
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    18. repec:bla:econom:v:50:y:1983:i:200:p:439-49 is not listed on IDEAS
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    Cited by:

    1. Patrick Francois, 2007. "Making a difference," RAND Journal of Economics, RAND Corporation, vol. 38(3), pages 714-732, September.

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    • J - Labor and Demographic Economics

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