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Organizational Slack in Subsidized Nonprofit Institutions

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  • Duizendstraal, Anton
  • Nentjes, Andries

Abstract

Informal objectives of managers next to the formal objective of the organization can be a source of organizational slack or X-inefficiency in nonprofit organizations. If the organization is subsidized, the donor can restrain organizational slack by choosing an appropriate subsidy system. Four subsidy systems are discussed: output, input, revenue, and lump-sum subsidy. Output subsidy reduces slack most. The ranking of input subsidy compared with lump-sum subsidy depends on the elasticity of demand for output. Revenue subsidy equals input subsidy. Changes in the subsidy regime for residential adult education in the Netherlands turn out to have been inconsistent. Copyright 1994 by Kluwer Academic Publishers

Suggested Citation

  • Duizendstraal, Anton & Nentjes, Andries, 1994. "Organizational Slack in Subsidized Nonprofit Institutions," Public Choice, Springer, vol. 81(3-4), pages 297-321, December.
    • Handle: RePEc:kap:pubcho:v:81:y:1994:i:3-4:p:297-321
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    Cited by:

    1. Bruno Bises & Fabio Padovano, 2004. "Government Grants to Private Cultural Institutions–The Effects of a Change in the Italian Legislation," Journal of Cultural Economics, Springer;The Association for Cultural Economics International, vol. 28(4), pages 303-315, November.
    2. Hielscher, Stefan & Pies, Ingo & Prinz, Aloys, 2015. "Umfassende Organisationsethik für die moderne Gesellschaft: Ein systematischer Vergleich gewinnorientierter und nicht-gewinnorientierter Unternehmen," Discussion Papers 2015-8, Martin Luther University of Halle-Wittenberg, Chair of Economic Ethics.
    3. Roelof de Jong & Andries Nentjes & Doede Wiersma, 2000. "Inefficiencies in Public Environmental Services," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 16(1), pages 69-79, May.
    4. Nolan Miller & Karen Eggleston & Richard Zeckhauser, 2006. "Provider choice of quality and surplus," International Journal of Health Economics and Management, Springer, vol. 6(2), pages 103-117, June.
    5. Bruno Bises, 2000. "Exemption or Taxation for Profits of Non-Profits? An Answer from a Model Incorporating Managerial Discretion," Public Choice, Springer, vol. 104(1), pages 19-39, July.
    6. Paul Raschky, 2007. "The overprotective parent - Bureaucratic agencies and natural hazard management," Working Papers 2007-03, Faculty of Economics and Statistics, Universität Innsbruck.

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