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The Nonprofit Sector And Industry Performance, Darius Noshir Lakdawalla, Tomas Philipson

Darius N. Lakdawalla

Given the importance of nonprofit industries in the economy, little analysis has been conducted as to whether the behavior of such industries differs from that of for profit industries. Extending previous firm-level analyses, we propose a neoclassical theory with an endogenous nonprofit sector. Our analysis implies that nonprofit firms have a competitive advantage over for-profit firms, so that marginal changes in the industry operate through the for-profit sector. As such, marginal industry behavior is identical to that of a for-profit industry, and nonprofit regulations may have a limited impact or even no impact on overall industry performance. Our theory has …