Entry and Exit of Nonprofit Organizations

The latest census of Italian nonprofit organizations – compared with the previous one – showed a significant development of the nonprofit sector between 2001 and 2011. The number of organizations increased more than 28 % while the growth of employees (about 61 %) was even more impressive. These results notwithstanding, the mere comparison of aggregate census data does not give a true understanding of the dynamic of the sector. The entry and exit of organizations, as well as their migration between different sectors of activity, or geographical areas, can be analyzed properly only using firm-level panel data, but these data are rarely available so that only a few authors had a chance to use them. In this paper, we try to fill this gap using firm-level panel data for the first time in Italy. Our analysis tempers the optimism arising from aggregate data. We show that: a) part of the growth is determined by the emergence of already active organizations that were not detected a decade ago; b) because of low barriers, the entry of new nonprofit organizations is very relevant, but their net contribution to the growth of employment is quite small; c) opposite to what happened in other countries, the exit of nonprofit organizations is very significant, and d) organizations that were already active a decade ago gave the most important contribution to the growth of employment. We also investigate geographical trends, showing that the slower growth of the nonprofit sector in Southern Italy depends on the very high exit rate of the area, while the entry rate is more or less in line with the rest of the country