What Determines the (Internal) Wage Distribution in Non-Profit Organizations?

Abstract

Existing research in labor economics has rarely accounted for non-profit status in examining wage dispersion. Contrariwise, in non-profit sector research, little has been said so far about (intra-organizational) wage dispersion. Scattered findings from previous work indicate that wage dispersion is smaller in non-profit organizations (NPOs) as compared to for-profits (FPOs). Fairness perceptions and high moral ideals of workers within this sector are often cited as reasons for this assumption. Empirically, however, the reasons for inter-sectoral differences remain obscure. In our analysis, we concentrate on specific characteristics of NPOs as compared to FPOs. More specifically, this paper is to address the question if volunteer workers, donations and public subsidies influence the within-firm wage dispersion in NPOs. In order to answer this research question we use Austrian matched employer-employee data collected in 2006. We estimate an instrument variable regression and find that NPOs that employ volunteer workers and NPOs with a more even mix between paid and unpaid staff display smaller wage dispersion. Donations and public subsidies augment the wage dispersion.