Working Paper: CEPR ID: DP4781
Authors: Colin Rowat; Paul Seabright
Abstract: This Paper models aid agencies as financial intermediaries that do not make a financial return to depositors, since the depositors' concern is to transfer resources to investor-beneficiaries. This leads to a significant problem of verification of the agencies' activities. One solution to this problem is for an agency to employ altruistic workers at below-market wages: workers can monitor the agency's activity more closely than donors, and altruistic workers would not work at below-market rates unless the agency were genuinely transferring resources to beneficiaries. We consider conditions for this solution to be incentive compatible.
Keywords: altruism; donations; nonprofit; signalling; two-sided market; wage differential
JEL Codes: D21; D64; J31; L31
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Altruistic worker employment (J29) | Perceived agency quality (L15) |
| Perceived agency quality (L15) | Donor behavior regarding donations (D64) |
| Altruistic worker employment (J29) | Donor behavior regarding donations (D64) |