Abstract
This paper asks whether nonprofit organization can have a positive rationale in an economy based on the division of labor, taking into account that the process of the division of labor occurs through profit-motivated economic behavior. By reconsidering existing economic theories of nonprofit organization in the context of the theory of the division of labor, the paper shows nonprofit organization to be an institutional consequence of two limitations on the division of labor: high coordination costs among interdependent agents and the existence of production-related, as opposed to consumption-related, preferences. These limitations prevent the system of the division of labor from fully gratifying the consumption preferences of economic agents and, thereby, create a functional niche for nonprofit organization.
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This research has been supported by Marie Curie Incoming International Fellowship of the Sixth Framework Program of the European Community (Contract no. MIF1-CT-2005-514036). The author is grateful to the anonymous reviewer for valuable comments. The views expressed in this publication are those of the author only. The European Commission is not liable for any use that may be made of the information contained in this publication.
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Valentinov, V. Nonprofit Organization and the Division of Labor: A Theoretical Perspective. Atl Econ J 34, 435–447 (2006). https://doi.org/10.1007/s11293-006-9032-z
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DOI: https://doi.org/10.1007/s11293-006-9032-z