Commercialism and Inter‐Industry Pay Differentials in the <scp>US</scp> Nonprofit Sector

ABSTRACT While the wage dispersion across industries persists for long, it has yet to be adequately explained. Focusing on the nonprofit sector, this study examines the effect of commercialism on pay at the industry level with nationally representative data from the perspective of institutional theory and management. I first constructed a factor to measure commercialism at the industry level with data from IRS Form 990. Then I modeled the net effect of commercialism on pay by using cross‐classified multilevel modeling to control effects at occupation, state, and individual levels. The findings show that commercialism increases pay at the industry level and widens pay gaps between managers and nonmanagerial staff. With multilevel modeling, the study closes the gap of the micro–macro divide in pay studies, provides an additional interpretation of compensating wage theory, and supplements empirical evidence to the debate about the impact of nonprofit commercialism.