Can Nonprofit Enterprises Lead to Better Revenue Conditions in Local Government?

Nonprofit enterprises may play an important role in revenue diversification from a government perspective, especially when local governments suffer from revenue shortages. This study attempts to examine whether an increasing number of nonprofit enterprises influence revenue diversification, as measured by the Herfindahl-Hirschman Index (HHI), as well as volatility using a panel data set from 2007 to 2012. The results indicate that local governments can secure more diversified and increased income sources as more nonprofit enterprises are created throughout the county. Moreover, nonprofit enterprises with stable business categories contribute more and therefore actively improve revenue conditions of local governments.