Working Paper: NBER ID: w21364
Authors: Jean-Etienne de Bettignies; David T. Robinson
Abstract: We study a model in which corporate social responsibility (CSR) arises as a response to inefficient regulation. In our model, firms, governments, and workers interact. Firms generate profits but create negative spillovers that can be attenuated through government regulation, which is set endogenously and may or may not be socially optimal. Governments may choose suboptimal levels of regulation if they face lobbying pressure from companies. Companies can, in turn, hire socially responsible employees who enjoy taking actions to ameliorate the negative spillovers. Because firms can capture part of the rent created by allowing socially responsible employees to correct social ills, in some settings they find it optimal to lobby for inefficient rules and then capture the surplus associated with being "good citizens" in the face of bad regulation. In equilibrium, this means CSR can either increase or decrease social welfare, depending on the costs of political capture.
Keywords: Corporate Social Responsibility; Lobbying; Regulation; Social Welfare
JEL Codes: D21; G30; H20
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| CSR (M14) | social welfare (I38) |
| costs of political capture (D72) | social welfare (I38) |
| government inefficiency (H11) | costs of lobbying (D72) |
| government inefficiency (H11) | CSR desirability (M14) |
| government inefficiency (H11) | benefits of CSR (M14) |
| distribution of rents from CSR (D33) | shareholder welfare (G34) |
| lobbying (D72) | regulatory outcomes (K20) |
| inefficient regulation (L51) | CSR (M14) |