Séminaire Macroéconomie

12h15 – 13h30

Lundi 21 septembre 2026

Salle 3001

Boyang MU (CREST) “Saving to Serve : Precautionary Under-Saving and the Nonprofit Starvation Cycle”

Summary :

Nonprofit organizations operate under volatile donations and persistent donor pressure to maximize program spending and minimize overhead. Many respond by holding minimal reserves, leaving them exposed to the well-documented starvation cycle. We formalize this tension as a dynamic allocation problem, in which a nonprofit facing contribution flows subject to volatility and occasional collapse, allocates resources among program spending, fundraising, and precautionary reserves. The model endogenously generates a target reserve ratio that trades off the insurance value of liquidity against the donor penalty for withholding resources from core programs, and characterizes the states from which reserves are insufficient to avert financial distress. We calibrate the model to a panel of US nonprofits’ IRS Form 990 filings from 2009 to 2022.

The median organization holds 2.5 months of operating expenses in reserves, below the 3–6 month industrial guideline. The calibrated model rationalizes these thin buffers as optimal under-insurance rather than managerial myopia: because donors penalize organizations whose program share falls below expectation, the shadow cost of accumulating reserves is high and organizations rationally accept greater exposure to distress. The framework yields risk-tailored reserve targets that vary with an organization’s fundraising capabilities, collapse risk, and donor sensitivity, in contrast to the uniform benchmarks currently in use.