Annals of Public and Cooperative Economics 89:1 2018
NONPROFITS IN THE FIELD: AN ECONOMIC ANALYSIS
OF PEER MONITORING AND SABOTAGE
Toulouse School of Economics, University of Toulouse, France
University of Marburg, Germany
Two types of intrinsically motivated workers are considered: good
workers care about the mission of an organization, whereas bad workers derive pleasure
from destructive behavior. Compared to the case with only good workers, the mission-
oriented sector has to resort to higher monitoring to deal with the threat of sabotage.
When standard monitoring is not possible, peer monitoring might deter bad workers
from entering the nonproﬁt sector but reduces output due to free riding and because
workers require higher compensation to work in teams. Nonproﬁts implement peer
monitoring only if the expected damage that bad workers can inﬂict is larger than the
loss of productivity due to teamwork. For senior staff with high reservation utility, they
turn a blind eye on serious sabotage if the likelihood of hiring a bad worker is perceived
as small. But they almost systematically implement peer monitoring for junior staff.
Keywords: Non-proﬁt, NGO, intrinsic motivation, sabotage, peer monitoring
JEL Classiﬁcation: D23, J33, L31, M54
It is estimated that 10 million NGOs are operating worldwide, both in advanced
and in developing countries.
For instance there are about 2 million of domestic and
foreign NGOs in India
and about 1.5 million in the United States.
sector is thriving as NGOs are generally seen as a force for good. Governments from
E-mails: firstname.lastname@example.org; email@example.com
2018 The Authors
Annals of Public and Cooperative Economics
2018 CIRIEC. Published by John Wiley & Sons Ltd, 9600 Garsington Road, Oxford
OX4 2DQ, UK and 350 Main Street, Malden, MA 02148, USA