Compensation in the nonprofit sector

We investigate the determinants of pay in the nonprofit sector using data for 25-55 year olds from the 1994-88 Current Population Survey Out-going Rotation Groups. Our results are consistent with the hypothesis that compensation is primarily determined in competitive markets without "labor donations" to nonprofit employers. One implication is that nonprofit workers receive virtually the same wages as observationally equivalent employees in similar positions with profit-seeking enterprises. We cannot rule out the possibility of nonprofit penalties or premiums for selected groups; however, the differentials are generally small and competition appears to play a dominant role in nonprofit wage setting.