This paper provides a brief overview of the current state of the not-for-profit sector and discusses specific governance issues in not-for-profit organizations. We offer an in-depth analysis of the issues that arise when not-for-profit organizations compete against for-profit firms in the same markets. We argue that while competition by for-profit firms can discipline not-for-profit firms and mitigate their governance problems, the effects of this competition are distorted by the not-for-profits’ corporate income tax exemptions. Based on a simple general equilibrium analysis, we argue that there is little justification for such exemptions.
Patrick Bolton & Hamid Mehran,
An Introduction to the Governance and Taxation of Not-For-Profit Organizations,
J. Acct. & Econ.
Available at: https://scholarship.law.columbia.edu/contract_economic_organization/12