Working Paper: CEPR ID: DP15030
Authors: Gani Aldashev; Esteban Jaimovich; Thierry Verdier
Abstract: We study the implications of transparency policies on the decentralized public goodprovision, by focusing on how the moral hazard problem inside non-profits interactswith the competitive structure of the sector under alternative informational regimes.More transparency on the use of funds has an ambiguous effect on the total publicgood provision and the welfare of donors. On the one hand, more transparency encourages non-profit managers to devote more resources to curbing rent-seeking insideorganizations. On the other hand, it tilts the playing field against non-profits managerswho face higher cost of monitoring, inducing them to abandon their missions. Fromthe donors' perspective, there are two corresponding opposing effects: transparency isgood because of the reduction in rent-seeking in the non-profits active in the market,but it can backfire because of a lower diversity of non-profits. Donors' welfare is lowerunder transparency (than under no information on the use of funds) for intermediatelevels of asymmetry in the cost of monitoring.
Keywords: nonprofit organizations; charitable giving; altruism; transparency
JEL Codes: L31; D64; D43; D23
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Transparency (T) (Y20) | Resource allocation (R) (D45) |
| Transparency (T) (D41) | Rent-seeking behavior (R') (D72) |
| Transparency (T) + Monitoring costs (C) (D23) | Total public good provision (P) (H49) |
| Transparency (T) (D41) | Donor welfare (W) (D69) |
| Transparency (T) (D41) | Diversity of nonprofits (D) (L31) |
| Transparency (T) (D41) | Total public good provision (P) (H49) |