Workers' response to monetary incentives in for-profit and non-profit jobs

Abstract

When workers decide how hard to work, they consider not only extrinsic factors (e.g., the salary), but also the type of work and the mission of the organization. We study the relationship between monetary compensation and worker effort in non-profit and for-profit settings using a modified gift-exchange experiment. Contrary to some prior research, we find that having a mission does not reduce the responsiveness of effort to increasing wages. Workers are more responsive to higher wages in a non-profit setting, contributing to our understanding of how the presence of a mission and monetary payments interact in work settings.