Does Population Heterogeneity Really Matter to Nonprofit Sector Size? Revisiting Weisbrod's Demand Heterogeneity Hypothesis

The size variation of the nonprofit sector across geographic locations has attracted substantial scholarly attention. One dominant theory exploring this issue is Weisbrod's demand heterogeneity hypothesis which suggests that the nonprofit sector size in a locality is positively related to population heterogeneity of the area. However, empirical tests of Weisbrod's hypothesis reach a very inconsistent conclusion. This study employs a meta-analysis to aggregate existing studies on the relationship between population heterogeneity and nonprofit sector size. The study finds a significant and positive association between the two variables, but the magnitude of the relationship is substantially small. Further, this relationship seems generalized across countries and is supported by both within-country and cross-country data and by different measurements of nonprofit sector size. In addition, population heterogeneity in terms of age, education, ethnicity, language, and religion supports the hypothesis better. Overall, although the demand heterogeneity hypothesis holds empirically, its explanatory power in predicting nonprofit sector size and growth might be less robust.