The Scarring Effect of the 2008 Economic Crisis: Growth and Growth Decline in Austria\u2019s Nonprofit Social Services Sector

Abstract

Since the 2008 economic crisis, social service providers worldwide have reported funding cuts, while the need for some social services has been increasing. This paper examines the combined and longer-term effects of such divergent developments on the nonprofit social services sector. The empirical analysis uses Austrian administrative data on six subfields of the sector covering the years 2003–2017. We investigate significant changes in the trends of four growth indicators applying interrupted time series analysis. We find that the 2008 economic crisis is associated with persistently lower growth rates in Austria’s nonprofit social services sector. The magnitude of this dampening effect differs across subsectors. Additionally, our findings suggest an increase in market concentration. Hence, the study discloses a long-term scarring effect of the economic crisis on Austria’s social services sector, raising doubts on the sector’s future resilience.