The Density of Nonprofit Organizations: Beyond Community Diversity and Resource Availability

This paper examines the determinants of the density of nonprofits registered in the USA by using alternative measures of government services and community conditions to test government failure theory and interdependence theory. Specifically, we examined the relationship between governments and nonprofits in the fields of art, health, and human services, with an emphasis on the level of the provision of public services, the heterogeneous demands of populations, and for-profit service providers. We found that the size of government, measured as government wage and fiscal decentralization, was negatively associated with the density of nonprofits, while government fragmentation was positively related to the density of nonprofits. The heterogeneity of community populations tended to increase nonprofit density. Taken together, therefore, our results offer more support for the government failure theory than the interdependence theory. Also, our findings that for-profit service organizations were positively related to the density of nonprofits call for researchers to pay attention to nonprofit partners and competitors in future studies.