Abstract

This paper provides new evidence on the comparative behavior of the third sector and the for-profit sector over the business cycle. Third sector organizations, typically made up of non-profit organizations and cooperatives, have an ownership structure distinct from for-profit firms. However, very little is known about the third sector sensitivity to economic fluctuations. Using a novel French dataset over the 2000-2019 period that allows us to differentiate the two sectors, we examine their respective behavior in terms of number of establishments and employment. Our results show that the cyclical sensitivity of the third sector and its two main subgroups are systematically lower than the for-profit sector. These patterns are independent of the business cycle and the sector size variable used. Our analysis essentially shows that organizations with democratic governance and a limited profit distribution constraint have a lower sensitivity to changes in economic conditions.