The determinants of sector choice and earning across the public, for-profit, and nonprofit sectors
MetadataShow full item record
As the nonprofit sector has become a more significant part of the economy in the United States, scholars have paid more attention to nonprofit employment. Despite this increased research interest in the nonprofit workforce, however, very little research has sought to understand its characteristics. This study examines the factors that affect a person’s choice to work in a specific sector in order to understand one of the more distinctive characteristics of nonprofit employment – overrepresentation of women in the nonprofit sector. In this study, both aspects of utility maximization and availability of alternatives in sector choice are considered. Though existing research on sector choice focuses on a binary choice either between for-profit and nonprofit or between for-profit and public, this study views a sector choice of prime-age salaried workers as a three-way choice among for-profit, nonprofit, and public sectors using 2003-2007 Current Population Survey September supplement data. This study further contributes to the literature on nonprofit employment by testing the impact of nonprofit status on an individual’s earnings. When women account for an overwhelming majority of the nonprofit workforce, examining the impact of nonprofit employment on wages is very important in terms of understanding women’s economic well-being across different sectors. Because individuals self-select into a particular sector and one’s earnings and sector of employment tend to be jointly determined, this study utilizes the endogenous switching regression to correct the self-selection bias in earnings determination. The results of the study indicate that the so-called “feminine” industries are concentrated in the nonprofit sector, and this gendered industry structure of the nonprofit sector attributes to women’s overrepresentation in the sector. The results also suggest that women with more education and more experience may choose nonprofit jobs over jobs in the other sectors, and therefore, there may a brain drain of females into the nonprofit sector. The findings show that nonprofit employment is generally associated with negative wage differentials, suggesting that nonprofit workers may accept lower earnings in the sector in order to achieve their intrinsic motivation or to have better job-related amenities.