The New Palgrave Dictionary of Economics

2018 Edition
| Editors: Macmillan Publishers Ltd

Non-profit Organizations

  • Richard Steinberg
  • Burton A. Weisbrod
Reference work entry


Non-profit organizations are hybrids – private but with restricted ownership rights. This defining ‘nondistribution constraint’ reduces incentives to exploit underinformed customers and allows non-profits to depart from profit-maximizing behaviour, although costly enforcement of this constraint limits effectiveness. Non-profits’ GDP share in the United States is about 30 per cent of the governmental non-defence share. Worldwide they employ about four per cent of the labour force. Non-profits receive public subsidies potentially justifiable by their provision of public goods. Sales of goods and services constitute the main source of non-profit revenues, but government grants and private donations are also important. Extensive research on the economic behaviour of non-profit, for-profit, and governmental organizations in mixed industries has disclosed systematic differences.


Agency problems Crowding out Free-rider problem Lindahl prices Nondistribution constraint Non-profit organizations Price discrimination 

JEL Classifications

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© Macmillan Publishers Ltd. 2018

Authors and Affiliations

  • Richard Steinberg
    • 1
  • Burton A. Weisbrod
    • 1
  1. 1.