Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/82506
Authors: 
Bengtsson, Niklas
Engström, Per
Year of Publication: 
2011
Series/Report no.: 
Working Paper, Department of Economics, Uppsala University 2011:8
Abstract: 
Results in behavioral economics suggest that material incentives can crowd out effort, if agents are mission-oriented rather than self-interested. We test this prediction on a sample of nonprofit organizations in Sweden. Swedish nonprofit organizations receive tax funds annually to promote global development issues through information campaigns. Traditionally, the contract with the main principal (the Swedish foreign aid agency) has been based on trust and self-regulation. We designed an experimental policy intervention, effectively replacing the trust-based contract with an increased level of monitoring from the principal, along with a threat to cut future funds if irregularities were detected. Our findings are inconsistent with (strong) motivational crowd-out. Overall, using both self-reported and observed measures of outreach, we find that the intervention improved efficiency. Graphical analysis shows that non-monitored organizations exhibit a distinct tendency to maximize expenditure; in contrast, organizations in the treatment group are more likely to return unused grants to Sida. Additionally, we find no crowding out of private contributions and no evidence of a discouraged NGO-syndrome.
Subjects: 
Bureaucrats
NGO
Economics of psychology
Foreign aid
Randomized experiments
Hawthorne effect
Laboratory vs. field evidence
Treatment externalities
Spillover effects, Reference group contamination
JEL: 
D03
L31
H83
O19
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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