John Evans Professor of Economics | Chair of IPR’s Program on Performance Measurement and Rewards
Economist Burton Weisbrod has written or edited 16 books and authored nearly 200 articles on the economics and public policy analysis of nonprofit organizations, education, health, the causes and consequences of research and technological change in health care, poverty, manpower, public interest law, the military draft, and benefit-cost evaluation. His most recent research examines the comparative economic behavior of for-profit, government, and private nonprofit organizations, and the causes and consequences of the growing commercialism of nonprofits. His latest book is Mission and Money: Understanding the University (Cambridge University Press, 2008), co-authored with Jeffrey Ballou and Evelyn Asch. This book continues his explorations of the role of nonprofit organizations in institutionally mixed industries, which he examined in The Nonprofit Economy (Harvard University Press, 1988) and in his edited volume, To Profit or Not to Profit: the Commercial Transformation of the Nonprofit Sector (Cambridge University Press, 1998).
Weisbrod served as a senior staff economist on the Council of Economic Advisors to presidents John F. Kennedy and Lyndon B. Johnson. He consults widely for governments, foundations, nonprofit organizations, and private firms in the United States and abroad.
From 1990 to 1995, Weisbrod served as director of Northwestern University's Institute for Policy Research (IPR), then known as the Center for Urban Affairs and Policy Research. At the University of Wisconsin-Madison, where he spent 26 years on the economics faculty before coming to Northwestern, he founded and directed the Center for Health Economics and Law and co-founded and directed the Training Program in Health and Mental Health Economics, supported by the National Institute of Mental Health. His elected positions include membership in the Institute of Medicine, National Academy of Sciences, fellow of the American Association for the Advancement of Science, in addition to being elected to its Governing Council for the 1998-2000 term, Executive Committee of the American Economic Association, and president of the Midwest Economics Association.
Weisbrod was appointed by then-Secretary of Health and Human Services Donna Shalala to the National Advisory Research Resources Council of the National Institutes for Health for a four-year term from 1999 to 2003. From 2000 to 2005, Weisbrod was chair of the Social Science Research Council (SSRC) Committee overseeing its program on Philanthropy and the Nonprofit Sector; from 2002 to 2005 he was a member of the National Academy of Sciences Panel on the Measurement of Nonmarket Activity, and since 2005 he has been a member of the new IRS User Group Advisory Committee.
Other honors include being recipient of the Lifetime Distinguished Research Award from the Association for Research on Nonprofit Organizations and Voluntary Action (ARNOVA) in 1997, being named Phi Beta Kappa Visiting Scholar for the 1998-99 academic year, and receiving, in 1993, the Carl Taube award from the American Public Health Association for his collaborative research on evaluation of community mental health programs.
Current and Recent Projects
Reward Structures and Economic Behavior in the Hospital and Hospice Industries. This project investigates whether nonprofits establish incentives (reward structures) that cause their workers to behave differently than those in governmental or for-profit organizations. In a series of studies of the hospital industry, Weisbrod used a unique data set that contains information on base-salary and performance-based bonus compensation covering more than 50 job types in 1,100 hospitals nationally. He used these data to analyze differences in nonprofit use of performance-based bonuses relative to the other organizational types, as well as the criteria hospitals use for rewarding "good" performance.
Another component of the project involved examining compensation patterns for CEOs and other senior executives, as well as lower levels of the managerial and technical worker ladder. This collaborative research, with Jeffrey Ballou of Northeastern University and IPR graduate fellow Burcay Erus, found substantial differences in incentive structures for CEOs across institutional forms, but none at middle management or technical worker levels. During the 1992-97 period when cost-containment pressure was mounting for hospitals, Erus and Weisbrod—focusing on governmental relative to nonprofit hospital behavior—found materially different compensation structures among these organizations, all of which are subject to a "nondistribution" constraint on their managerial rewards.
In the hospice industry, which is also characterized by a mixture of nonprofit and for-profit providers, Weisbrod and former Northwestern University research professor Richard Lindrooth tested hypotheses regarding the differential responses of these varied providers to financial incentives coming from the Medicare program. In particular, they studied the responses to incentives that implicitly encourage earlier admissions and hence, longer lengths of participation, in hospice programs, finding that for-profits take greater advantage of fiscal incentives to attract patients with longer and, thus, more profitable expected lengths of stay.
Performance Measurement in the Public and Nonprofit Sectors. Many of the traditional tasks of government—providing for defense, educating children, rehabilitating prisoners—are now outsourced to private firms, both for-profit and nonprofit. In many communities across the country, for example, public schools are now managed by for-profit firms, and privately managed, for-profit prisons now exist in more than half the states. The federal government contracts with civilian firms like Brown and Root to provide the military with logistical support, and former President Bush suggested that social services might better be provided by "faith-based" institutions. In many of these relationships, outputs are very hard to monitor reliably. Higher test scores coupled with a profit for the management company, for example, might or might not show that a school is "improving." Research by Weisbrod and Erus looks at the monitoring problem from the input side: What rewards and penalties (i.e., incentives) are evident in the contracts between government agencies and the private firms that perform an increasing array of activities that were once the primary domain of government? By examining those incentives, looking particularly at privately managed jails, this research attempts to provide fresh insight on the changes in the historical division of responsibility among the for-profit, governmental, and nonprofit sectors.
Weisbrod and Maxim Sinitsyn of McGill University completed a study of the behavior of nonprofit organizations in for-profit markets, examining profitability of commercial activity in six nonprofit sectors including health and education. One of the goals was to explain the widespread and sustained unprofitability reported to the IRS in activities—those that are not substantially related to their tax-exempt missions and, as such, are subject to corporate profits taxation—that appear to have no justification other than to reap profit. The authors found that the nonprofits selected their unrelated activities and engage in joint cost allocation accounting in ways that understate the true profits.
In the most recent major activity Weisbrod organized an interdisciplinary series Seminars on Performance Measurement in the Public and Nonprofit Sectors, to focus research attention on broad issues of both the measurement of what is “good” performance outside the for-profit sector and the problems of developing reward structures that encourage the desired performance. Academic research presentations have covered such activities as health care, education, police, courts, and charitable fundraising, and these have been supplemented by presentations from officials of a foundation and a museum regarding their internal efforts to gauge performance. Weisbrod is working on a book on the relationships between the measurement of performance and the incentives to achieve better performance, highlighting the ways in which reward structures can distort behavior in inefficient ways.
Weisbrod, Burton, Jeffrey Ballou, and Evelyn Asch. Mission and Money: Understanding the University (Cambridge University Press, 2008).
Weisbrod, Burton A., ed. To Profit or Not to Profit: The Commercial Transformation of the Nonprofit Sector (Cambridge University Press, 1998). Editor and author or co-author of eight of the 15 chapters.
Weisbrod, Burton A. The Nonprofit Economy (Harvard University Press, 1988).
Weisbrod, B., with M. Sinitsyn. 2008. Behavior of nonprofit organizations in for-profit markets: The curious case of unprofitable revenue-raising activities. Journal of Institutional and Theoretical Economics 164(4): 727–50.
Weisbrod, B., with R. Steinberg. 2008. The nonprofit firm. In The New Palgrave Dictionary of Economics, 2nd ed, ed. S. Durlauf and L. Blume. London: Palgrave Macmillan.
Weisbrod, B., with R. Lindrooth. 2007. Do religious nonprofit and for-profit organizations respond differently to financial incentives: The hospice industry. Journal of Health Economics 26(2): 342–57.
Weisbrod, B., with J. Goddeeris. 2006. Why not for-profit? Conversions and public policy. In Government and Nonprofit Organizations: The Challenges of Civil Society, revised edition, ed. E. Boris and C. E. Steuerle. Washington, D.C.: The Urban Institute.
Weisbrod, B., with P. Devereux. 2006. Does ‘satisfaction’ with local public services affect complaints (voice) and geographic mobility (exit)? Public Finance Review 34(2): 123–47.
Weisbrod, B., with R. Steinberg. 2005. Nonprofits with distributional objectives: Price discrimination and corner solutions. Journal of Public Economics 89(11–12): 2205–30.
Weisbrod, B. 2004. The pitfalls of profits: Why nonprofit organizations should get out of commercial ventures. Stanford Social Innovation Review 2(3): 40–47.
Weisbrod, B., with B. Erus. 2003. Objective functions and compensation structures in nonprofit and for-profit organizations: Evidence from the mixed hospital industry. In The Governance of Not-for-profit Firms, ed. E. Glaeser, 117–42. Chicago: University of Chicago Press.
Weisbrod, B., with J. Ballou. 2003. Managerial rewards and the behavior of for-profit, governmental, and nonprofit organizations: Evidence from the hospital industry. Journal of Public Economics 87(9): 1895–1920.
Weisbrod, B., with L. Segal. 2002. Volunteer labor sorting across industries. Journal of Policy Analysis and Management 21(3): 427–47.
Weisbrod, B. 2002. An agenda for quantitative evaluation of the nonprofit sector: Need obstacles and approaches. In Measuring the Impact of the Nonprofit Sector on Society, ed. P. Flynn and V. A. Hodgkinson, 273–90. New York: Kluwer Academic/Plenum.
Weisbrod, B., with K. Kapur. 2000. The roles of government and nonprofit suppliers in mixed industries. Public Finance Review 28(4): 275–308.
Weisbrod, B., with C. Okten. 2000. Determinants of donations in private nonprofit markets. Journal of Public Economics 75(2): 255–72.
Weisbrod, B., with M. Roomkin. 1999. Managerial compensation and incentives in for-profit and nonprofit hospitals. The Journal of Law, Economics and Organization 15(3): 750–81.
Weisbrod, B., with C. LaMay. 1999. Mixed signals: Public policy and the future of health-care R&D. Health Affairs 18(2): 112–25.
Weisbrod, B., with J. Goddeeris. 1999. Why not for-profit? Conversions and public policy. In Government and Nonprofit Organizations: The Challenges of Civil Society, ed. E. Boris and C. E. Steuerle, 235–65. Washington, D.C.: The Urban Institute.