Article | Journal of Economic Perspectives

What Do Nongovernmental Organizations Do?

by Eric D. Werker and Faisal Z. Ahmand


Nongovernmental organizations are one group of players who are active in the efforts of international development and increasing the welfare of poor people in poor countries. Nongovernmental organizations are largely staffed by altruistic employees and volunteers working towards ideological, rather than financial, ends. Their founders are often intense, creative individuals who sometimes come up with a new product to deliver or a better way to deliver existing goods and services. They are funded by donors, many of them poor or anonymous. Yet these attributes should not be unfamiliar to economists. Development NGOs, like domestic nonprofits, can be understood in the framework of not-for-profit contracting. It is easy to conjure up a glowing vision of how the efforts of NGOs could focus on problem solving without getting bogged down in corruption or bureaucracy. But the strengths of the NGO model have some corresponding weaknesses—in agenda setting, decision making, and resource allocation. We highlight three factors in explaining the increased presence of NGOs in the last few decades: a trend towards more outsourcing of government services; new ventures by would-be not-for-profit "entrepreneurs"; and the increasing professionalization of existing NGOs.

Keywords: Non-Governmental Organizations; Growth and Development; Welfare or Wellbeing; Poverty; Service Delivery; Crime and Corruption; Social Entrepreneurship; Decision Making; Resource Allocation; Product Development; Framework;


Werker, Eric D., and Faisal Z. Ahmand. "What Do Nongovernmental Organizations Do?" Journal of Economic Perspectives 22, no. 2 (Spring 2008).