Abstract

This paper proposes a survey of the economic literature about nonprofit organisations (NPO), addressing two complementary issues. First, it focuses on goods and services produced by NPOs. Empirical research shows that these organisations are mainly present in the sectors of education, welfare services and health services. Theoretical research tries to find a common factor that links all these different activities and distinguishes between altruism and egoism of agents. When agents behave altruistically and non-market transfers (such as donations) prevail, NPO produce ideological goods and relational goods. When agents behave egoistically and market exchanges prevail, NPO are mainly active in sectors characterised by strong asymmetric information between producers and consumers and in sectors in which collective goods are produced. The paper then examines why NPO seem to be more efficient in producing these goods. On the one hand, in the case of altruistic behaviour of agents, altruism itself is the key variable to explain the efficiency of NPO relative to other organisational forms. On the other hand, in the case of egoism, it emerges that NPO are more trustworthy than other organisations. The trustworthiness stems from the presence of a statutory non-distribution of profits constraint. However, this constraint "attenuates" property rights and can generate inefficiencies. The absence of a market for property rights in the nonprofit sector leaves stakeholders without a mechanism to discipline managers. However, the adoption of an "ethic code" can solve these problems, inducing managers to invest in reputation.