Do Non-profit Enterprises Pay More For Their Labor Inputs? An Examination of Hospital Behavior

How the behavior of non-profit organizations differs from that of for-profit organizations has been the topic of a wide body of research. The motivational and behavioral differences resulting from the two organizational forms are particularly important in the U.S. health-care sector – an industry dominated by non-profit enterprise. This paper outlines some of the theories of non-profit hospital behavior and reviews some of the empirical work related to those theories. I then examine empirically whether there is a difference in wages and salaries paid to seven categories of hospital employee in different types of hospitals. To my knowledge, there have been no studies that evaluate directly whether non-profit hospitals pay more than their for-profit counterparts. I find that non-profit hospitals pay significantly higher wages to their employees in five of seven major categories. In the conclusion I highlight those theories that are consistent with these empirical findings and those that are not. ∗ I would like to thank Professor Lawrence J. White (Stern School of Business, New York University) for his consistent and insightful guidance in writing this paper. I would also like to thank Professors William Greene, Richard Sylla and Richard Brief for their thoughtful comments and suggestions. This paper is extracted from my Ph.D. dissertation, “Essays in the Economic Behavior of Hospitals”, at the Stern School of Business, New York University.