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When Is Social Responsibility Socially Desirable?

Author

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  • Jean-Etienne de Bettignies
  • David T. Robinson
Abstract
We study a model in which corporate social responsibility arises in response to inefficient regulation. In our model, firms, governments, and workers interact. Firms create negative spillovers that can be attenuated through government regulation, which is set endogenously and may not be socially optimal. Companies can hire socially responsible employees who enjoy correcting spillovers. Because firms can capture rents created by allowing this, they sometimes find it optimal to lobby for inefficient rules and then encourage socially responsible behavior in their midst. Thus, social responsibility can either increase or decrease social welfare, depending on the costs of political capture.

Suggested Citation

  • Jean-Etienne de Bettignies & David T. Robinson, 2018. "When Is Social Responsibility Socially Desirable?," Journal of Labor Economics, University of Chicago Press, vol. 36(4), pages 1023-1072.
    • Handle: RePEc:ucp:jlabec:doi:10.1086/697476
    DOI: 10.1086/697476
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    JEL classification:

    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General

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