Measuring the non-profit sector cross-nationally: a comparative methodology

As a result in part of the way non-profit institutions are defined and treated in the United Nations System of National Accounts (SNA), little is known about the size, scope, financial base and role of this set of institutions at the international level, even though their importance is increasingly being recognised throughout the world. To remedy this significant lack of systematic information on non-profit institutions cross-nationally, the Johns Hopkins Comparative Nonprofit Sector Project has undertaken a major analysis of the economic role of this sector in twelve countries throughout the world, utilising a more meaningful definition of the sector and an approach that is otherwise consistent with the overall thrust of the SNA system. This paper outlines the basis of the more inclusive definition of the non-profit sector embodied in this project, the classification system formulated to structure data-gathering on this more broadly-defined sector and the data assembly strategy developed to build up key estimates of the scale, structure and revenue sources of the non-profit sector in the project countries. The article concludes with a recommendation to incorporate a similar approach to the assembly of data on the non-profit sector into the ongoing SNA system on a regular basis.Professor Lester Salamon is Director of the Institute for Policy Studies and Director of the Comparative Nonprofit Sector Project at the Johns Hopkins University, Baltimore, Maryland, 21218.Helmut Anheier is Research Scientist at the Institute for Policy Studies at the Johns Hopkins University and Assistant Professor of Sociology at Rutgers University, New Brunswick, New Jersey, 08903. He is co-editor ofVoluntas.     

Overall evaluation of economic theories

This article evaluates economic theories of the non-profit sector by their ability to enlighten our understanding of the scope of inquiry, the determinants of the size and scope of the non-profit sector, and the behavioural responses of donors, volunteers, paid staff and non-profit organisations to changes in their external environment. Adherence to a non-distribution constraint has proven to be a useful way of delimiting economic analysis of non-profit organisations, but more attention should be paid to alternatives. Economists have been less successful at developing usable distinctions between voluntary action and exchange. The size and scope of the sector appear to be determined by entrepreneurial supply factors, donations (which in turn are influenced by tax policy, governmental spending, fund-raising, and the quality and mixture of organisational outputs, commercial or charitable), commercial activities, capital supply, the supply of labour (paid and volunteered), the marketability of outputs, and the distribution of consumer characteristics. Variations of James's (1983) model have proven useful to predict the reaction of non-profits to exogenous changes. I thank Symposium participants, especially Mark Schlesinger, Paul DiMaggio, Anne Preston, Avner Ben-Ner and Helmut Anheier for helpful suggestions.     

The history of non-profit organisations in Australia as a test of some recent non-profit theory

Over the past two decades, a number of important theories of non-profit activity have been developed, mainly by economists. In part, these theories attempt to explain why non-profit organisations are formed and flourish in some fields of activity and not in others. This paper seeks to test the adequacy of these explanations by seeing if they can explain seven cases of the formation of important sets of non-profit organisations in Australia. To this end, it sketches a history of non-profit organisations in Australia over the past 200 years and explores in more detail seven important cases of non-profit formation and development. It finds that, while in most cases the economic theories provide part of an explanation, there is a good deal which they cannot explain. Adequate explanations of non-profit formation will need to draw on social as well as economic theory.     

Behavioral economics and the economics of Keynes

The aim of this paper is two-fold: it first evaluates some of the psychological insights offered by Keynes in his economic theories, and secondly it weighs up these insights in the light of recent research in behavioral and experimental economics. We found that many of the psychological ideas set forth by Keynes in his economic works, especially in The General Theory, have a defensible behavioral foundation and fit broadly the actual behavior of economic agents in the real world as suggested by recent empirical evidence. As a consequence, we argue that Keynesian economics can benefit from this interaction, especially for issues related to judgment under uncertainty and building solid microfoundations for macroeconomics.     

Stakeholder theories of the non-profit sector: One cut at the economic literature

This article examines and organises the economic literature dealing with non-profit institutions using the concept of ‘stakeholders’. In general, the literature identifies conflicts between various groups of stakeholders and then proceeds in two very different directions. The first is supportive of the non-profit sector, suggesting that non-profit organisations resolve those conflicts more effectively than other types of institutions. This provides a positive theory of the non-profit sector, explaining that non-profit institutions evolve when they are more effective in providing a particular good or service than other possible institutional arrangements. The second direction is more critical of the non-profit sector, suggesting that those conflicts will persist in non-profit institutions and will require some kind of resolution, including perhaps government intervention. Of course, a stakeholder approach to non-profit theory focuses on conflict and ignores some other views of the sector.     

Union productivity effects and economic efficiency

Because they lack formal theoretical foundations, existing empirical models of union productivity effects tell us little about why such effects occur and what their impact is on economic efficiency. This paper attempts to fill this gap by developing three alternative formal models of union productivity effects with contrasting implications for economic efficiency and then assessing which is most consistent with the available empirical evidence. While it turns out that an “agency” model, which predicts positive union efficiency effects, seems to be able to predict the observed results best, the evidence is far from conclusive. Further tests are suggested to distinguish the models. The author would like to thank Richard Freeman, James Medoff, and participants in the University of Western Ontario labor workshop for many helpful comments.     

The level and growth of union/nonunion relative wage effects, 1967–1977

This paper pools cross-section data to obtain an estimate of the overall effects of unions on relative wages for the period 1967 through 1977. We found the average union wage premium for all workers to be roughly 24 percent, but that this premium varies substantially between subgroups of workers. Our analysis showed that real wage rates increased faster in the union sector than in the nonunion sector between 1967 through 1977. However, we found that this relative growth pattern in wages was caused by economic conditions rather than in any fundamental shift in the power of unions. We wish to thank James S. Cunningham, H. Gregg Lewis, and John Pencavel for helpful comments.     

Evaluating economic theories of NPOs: A survey, a case study and some new directions for socio-economics

The contribution economists have made to the multidisciplinary field of non-profit studies is remarkable when one considers that non-profit organizations (NPOs) have traditionally been regarded as “non-economic” institutions that lie outside the scope of economic analysis. However, despite its achievements there has been concern about the emergence of “theoretical inertia” in the economics of NPOs. This paper suggests some ways in which the revisionist approach reflected in economic theories of the supply-side of the voluntary sector could be augmented. In particular it focuses on the emotional basis for stakeholder commitments and the consequent dependence NPOs have on their organizational leadership to foster the development of shared hopes that can sustain these commitments in the face of disappointments. These ideas are discussed in relation to the provision by NPOs of supported employment services to the disabled.     

The emergence of a voluntary sector and philanthropy in Vietnam: Functions, legal regulation and prospects for the future

A significant number and wide range of Vietnamese non-profit and voluntary organisations have developed since Vietnam embarked on a programme of economic reform in late 1986. Philanthropy has begun to grow as well, albeit more slowly. The non-profit and voluntary sector and the state, each face important challenges as development of the sector accelerates. The state has sought both to encourage growth of non-profit, voluntary and philanthropic institutions, but also to control the pace and directions of that growth. Those dual aims are reflected in the state's regulation of the sector since the mid-1980s. This article provides detailed information on the development of the non-profit sector in Vietnam. It examines some common problems many of the new non-profits and voluntary organisations face and discusses the rapidly changing environment for philanthropy in Vietnam. The article also reviews the developing legal environment for non-profits and philanthropy, compares the situation in Vietnam to other countries in transition, and situates the functions of the non-profit sector in Vietnam in the context of the emerging scholarly literature on functions and models of the non-profit sector and government/non-profit relations. formerly Program Officer for Vietnam, The Ford Foundation (1992–1995) The author is grateful to John Ambler, Nguyen Thi Van Anh, Mayusaki Ayuzame, Mary Jane Ballou, Barnett Baron, Christopher Bruton, Emmett Carson, Kathy Charlton, Le Trong Cuc, Ray Eaton, Mary Etherton, Virginia Foote, Peter Geithner, Neil Jamieson, Lisa Jones, Tim Kerr, Minh Kauffman, Viet Huong Kurtz, Borje Ljunggren, Toichi Makita, David Marr, John McAuliff, Noriko Ogawa, James Rockwell, John Rogers, Vo Quy, Tony Salzman, Yasuhiro Tanaka, Nguyen Van Thanh, Ngo Ba Thanh, David Thomas, Phan Toan, Mike Yeldham and Mary Zurbuchen, and representatives of the many Vietnamese groups interviewed for this article. This article represents the author's views and not those of the Ford Foundation nor any other organisation or individual. All translations from the Vietnamese, except as indicated, are by the author.     

Politics and the development of the Hungarian non-profit sector

One of the important developments in post-Communist Hungary has been the growth of the voluntary or non-profit sector. Under the Communist regime, voluntary associations were controlled and independent organisations were largely suppressed. During the 1980s, advocacy groups and independent associations emerged to challenge the Communist monopoly on organisation. These challenges were instrumental in laying the foundation for the post-Communist non-profit sector, providing models of organisation and experienced activists. After the creation of a new legal framework in 1989 and 1990, the growth of the non-profit sector was dramatic. Two types of non-profit organisations have developed in democratic Hungary: associations predominate in membership activities, while foundations are active in fields requiring fund-raising. Attempts by the Hungarian Democratic Forum-led government to shape the non-profit sector to meet its goals were met with political pressure from professionals in the non-profit sector. The result was the beginnings of a contract-for-service regime and increased organisation of a contract-for-service regime and increased organisation of interests within the non-profit sector itself. This is a revised version of a paper presented at the 1994 Annual Conference of the Association for Research on Nonprofit Organizations and Voluntary Action (ARNOVA), Berkeley, California, October 1994. The author gratefully acknowledges support from the Program on Nonprofit Organizations (PONPO), Yale University. Helpful comments were provided by David Bronkema, éva Kuti, Debra Minkoff, Suzanne Morrah and members of the PONPO Colloquium.     

The third sector in welfare policies in Italy: the contradictions of a protected market

The paper describes how the involvement of non-profit organisations (NPOs) in welfare politics in Italy has historically developed in a mutual accommodation with the state, which has prevented the growth and the public recognition of an independent third sector. Using data from official statistics and recent research on non-profits, three analytical dimensions of the relationship between State and the third sector are considered: the resource exchange; the division of responsibility for delivering public services; and the dynamics of social policy making. The study indicates that distinctive features of the ‘welfare mix’ in Italy have been: the attribution of public status to many NPOs as a consequence of an arrangement between Church and state; the weakness of state guidance, in spite of the generous economic assistance provided to NPOs by the state; the substitutive role of NPOs in providing basic public services; and the emergence of informal arrangements between public authorities and NPOs mediated by political patronage. I thank Ralph Kramer, Ugo Ascoli, Perri 6, and three anonymous referees ofVoluntas for helpful comments they provided on an earlier draft of this paper. My research was supported by a grant from the National Council of Research of Italy, and through facilities provided by the School of Social Welfare at the University of California, Berkeley. An earlier version of this paper is published in P. 6 and I. Vidal (eds)Delivering Welfare: Re-positioning Non-profit and Co-operative Action in Western European Welfare States, CIES, Barcelona, 1994.     

Mapping the non-profit sector in the United States: implications for research

The need for a national typology of the US non-profit sector has long been recognised. A typology which could better define and describe the variety and diversity of non-profit organisations by type or major function will serve numerous research and public policy uses. This article describes the essential elements of the National Taxonomy of Exempt Entities (NTEE), developed over almost a decade after extensive consultation with agencies in the non-profit sector and the United States government. The article reports an initial analysis of the classification of nearly one million non-profit organisations in the US, and comparisons are made with earlier estimates inDimensions of the Independent Sector. Based on these findings, changes are proposed to this biennial statistical profile of the US non-profit sector. The importance of developing national typologies of non-profit organisations is discussed as a basis for comparative international research.     

Census data on non-profit organisations

This paper describes how the Bureau of the Census collects and publishes data on non-profit organisations in its economic censuses programme. The paper provides a brief history of the economic censuses and describes in more detail the census of service industries component. The progressive expansion of the industry coverage of the census is explained and related to the non-profit sector. The paper further describes concepts and methodologies that are used in collecting and publishing data for non-profit organisations. Definitions, methods of enumeration, and basic data measures are explained and contrasted to concepts used in covering the for-profit sector. Finally, the paper describes how census data can be used to better understand the non-profit sector and identifies some possibilities for improving information from the economic censuses and other statistical programmes which cover non-profit organisations.     

Women and philanthropy

Although women often played a central role in the creation of non-profit organisations through their donations of time, money and material possessions, their efforts have received little systematic attention from students of the non-profit sector, particularly outside the United States. This special issue ofVoluntas traces the ties between philanthropy and women's social, economic and political roles in Argentina, Ireland, the Netherlands, Germany, Russia, India and Australia. Written as part of an international collaborative study co-ordinated by the Center for the Study of Philanthropy at the Graduate School of the City University of New York, these essays test a variety of theoretical models for assessing the significance of philanthropic activities in empowering disadvantaged groups and fostering the growth of civil society.     

Tax-based research and data on non-profit organisations

Tax-exempt, non-profit organisations represent a significant and growing sector within the US economy. Between 1975 and 1990, assets of tax-exempt organisations increased in real terms by over 150 per cent while the revenue increased by over 227 per cent. This compares to a growth in real GDP of 52 per cent over the same period. A variety of tax policy issues on tax-exempt organisations and the non-profit sector can be addressed using several sources of data collected by the IRS from federal information and tax returns of exempt organisations. The Statistics of Income (SOI) Division, using sample data, conducts studies of many of the different components of the tax-exempt sector, including non-profit charitable organisations, organisations exempt under sections 501(c)(4)-(c)(9), private foundations and 4947(a) charitable trusts, and the unrelated business income of tax-exempt organisations. Income statement, balance sheet and other financial data, as well as a great amount of non-financial information, are collected in these SOI studies. The primary purposes of this article are: first, to document the role of the non-profit sector in the US economy and the evolving growth and change within the sector from the mid-1970s through to the present; and, second, to describe the ongoing SOI studies of tax-exempt organisations, the products and services available through SOI, and the future statistical plans at SOI for data collection and analysis of tax-exempt organisations and the non-profit sector.     

Non-profit institutions in a flow of funds framework

The benefits of providing a separate accounting for non-profit organisations in the financial accounts of the United States are discussed. At present, national economic accounts in the US include non-profit organisations with individuals in the household sector; separate information on the financial activity of non-profit institutions until now has not been available. In this paper, aggregate statistics from federal government tax-exempt filings for non-profit institutions are put into a US flow-of-funds framework. The data for the 1982–1988 period indicate that non-profit institutions accounted for a significant and growing proportion of assets of the household sector in the United States. Their liabilities were also a surprisingly large share of the household sector total. Moreover, funds supplied by the non-profit sector for investment were in some years comparable to funds made available by several important groups of non-depository financial intermediaries. Separate accounting for non-profit organisations within national economic accounts would be likely to reveal an important channel for investment financing in the United States and would significantly improve our ability to measure and analyse the financial activity of individuals by allowing for a purer household sector.The analysis and conclusions set forth are those of the authors and do not necessarily indicate concurrence by Salomon Brothers, the Board of Governors, Federal Reserve Banks or other members of their staffs.     

Public good theories of the non-profit sector: Weisbrod revisited

Burton Weisbrod's 1975 article, Toward a theory of the voluntary non-profit sector in a three-sector economy, models non-profit organisations as suppliers of public goods which are undersupplied by government to heterogeneous populations. This article examines the implications, extensions and empirical tests of the Weisbrod theory. It also examines the theories of pure and impure altruism, the heterogeneity hypothesis, and the various ‘publicness’ indexes of non-profit output. The commonalities between the public good model and the trustworthiness model of non-profit organisations are also explored. He is also a Research Associate of the Mandel Center for Nonprofit Organizations at Case Western Reserve University.     

The possible role of the non-profit sector in Hungary

A common feature of most non-profit theories is their concentration on the service-providing role of non-profit organisations, and the neglect of their redistributional role. At the cost of some simplification, there are two possible public policy responses to social inequalities: (1) the welfare state model with welfare redistribution under government control; and (2) the non-profit-based model — a large network of private organisations heavily supported by the government and complemented by government delivery of services. After 40 years of state socialism, Hungary now faces some important questions. What will be the role of the new voluntary sector? What are the possibilities of following the Western European route — a version of the welfare state model — or the American way — a non-profit-based model bolstered by ‘third-party government’? The present Hungarian situation is ambiguous; we can find arguments for and against both. It is also argued that a mixed solution, some cooperation between the public and private sectors, is needed. The Western European, American and Hungarian experiences indicate that only a strong for-profit sector and a developed, harmonious government/non-profit partnership can ensure healthy social and economic development. The present Hungarian situation is far too complex and difficult to promise a fast and conflict-free establishment of this partnership. But both public institutions and government are acting in a way that may result in the development of a government-supported non-profit sector. There may be an opportunity for developing a ‘Hungarian welfare state model’.     

Donor relationship management practices in the South African non-profit sector

The importance of non-profit organisations (NPOs) in the South African development sector is undisputed, especially after the economic recession that negatively affected government's delivery of social services. Despite its important role, NPOs experience great difficulties, obtaining sustained funding.     

In search of the non-profit sector II: The problem of classification

Building on a previousVoluntas article (Salamon and Anheier, 1992b), which formulated a systematic approach to defining the non-profit sector for purposes of comparative research, this article takes on the complementary task of formulating a classification system that can be used to differentiate systematically the types of non-profit organisations that exist at the global level. To do so, the article first assesses a number of existing classification systems, such as the International Standard Industrial Classification and the National Taxonomy of Exempt Entities. Finding these systems inadequate, the article then introduces an alternative system, which we term the International Classification of Nonprofit Organizations (ICNPO). The ICNPO classifies non-profit establishments into 12 major groups based on their primary economic activity, and then further sub-divides these into 24 sub-groups. The result is a system that scores high in terms of five key evaluation criteria: economy, significance, rigour, organising power, and richness. What is more, initial tests of the ICNPO in a set of countries show that it performs well in coming to terms with the diverse types of non-profit institutions that exist around the world.Lester Salamon is Professor at the Johns Hopkins University, Baltimore, Maryland 21218 and Director of the Institute for Policy Studies there.Helmut Anheier is Research Scientist at the Institute for Policy Studies at the Johns Hopkins University and Assistant Professor of Sociology at Rutgers University, New Brunswick, New Jersey, 08903. He is co-editor ofVoluntas.The authors are grateful to Kusuma Cunningham for her assistance in developing the ICNPO and for compiling Appendix C of this paper.