Does pay motivate volunteers?

Abstract: Volunteer work is an increasingly large, yet ill-understood sector of the economy. We show that monetary rewards undermine the intrinsic motivation of volunteers. A unique data set from Switzerland allows us to assess the effects of financial rewards on the effort put into volunteer work. There is a fairly standard pattern regarding the volunteers reaction e.g. to more labor market work hours. But we obtain the puzzling result that, when rewarded, volunteers work less. These findings are in line with a large literature in social psychology emphasizing that external rewards can undermine the intrinsic motivation for an activity. We show the implications for public policy towards volunteering. JEL classification: A13;D23;J30.