What determines volunteer work? On the effects of adverse selection and intrinsic motivation

- We consider the screening problem of a firm willing to hire job applicants.
- Workers are intrinsically motivated and privately informed about their ability.
- When intrinsic motivation is high, low-ability workers earn negative wages.
- With limited liability, low-ability types are volunteers and provide equal effort.

We analyse the screening problem of a firm hiring workers without knowing their ability while observing their intrinsic motivation. We show that volunteerism is the contractual outcome when workers are low-skilled, have high motivation, and are protected by limited liability.