Handbook of Research on Nonprofit Economics and Management
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Handbook of Research on Nonprofit Economics and Management

Edited by Bruce A. Seaman and Dennis R. Young

Nonprofit organizations are arguably the fastest growing and most dynamic part of modern market economies in democratic countries. This Handbook explores the frontiers of knowledge at the intersection of economics and the management of these entities. The authors review the role, structure and behavior of private, nonprofit organizations as economic units and their participation in markets and systems of public service delivery, assess the implications of this knowledge for the efficient management of nonprofit organizations and the formulation of effective public policy, and identify cutting edge questions for future research.
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Chapter 22: Government Funding Policies

Stefan Toepler


1 Stefan Toepler Introduction Other than for regulation (including fiscal regulation, such as tax exemption rules), government funding policies are the most direct embodiment of the relationship between government and the nonprofit sector. Government–nonprofit relations in turn are arguably the single most important concern across the world for nonprofit advocates and analysts alike. Whether in industrialized or developing nations, philanthropic resources are generally very limited, whereas earned income strategies are either perceived as dubious or hampered by the lack of requisite institutions, such as functioning markets. For nonprofits the choices are thus either to pursue their missions incrementally on a relatively small scale or to look for alternative financial resources to help build up operations and yield results at higher levels. For much of the second half of the twentieth century, nonprofits everywhere have opted to explore and utilize various forms of direct government support to scale up operations and reach additional clients, users or audiences for their work. Accepting government monies is nevertheless perceived as somewhat of a doubleedged sword, leading to a bifurcation of the debate. Two contrary strands of evaluating the role of government support emerged relatively early within the nonprofit literature. One strand portrays the government–nonprofit relationship as largely positive, arguing that the postwar influx of government monies enabled a significant scaling up of nonprofit activity that catapulted the sector to its current position of prominence. The other strand of the literature focuses more on the potentially negative effects of accepting government support for...

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