Working Paper: NBER ID: w31803
Authors: Hunt Allcott; Giovanni Montanari; Bora Ozaltun; Brandon Tan
Abstract: The growing discussions of impact investing and stakeholder capitalism have increased interest in measuring companies' social impact. We conceptualize corporate social impact as the welfare loss that would be caused by a firm's exit. To illustrate, we quantify the social impacts of 74 firms in 12 industries using a new survey measuring consumer and worker substitution patterns combined with models of product and labor markets. We find that consumer surplus is the primary component of social impact (dwarfing profits, worker surplus, and externalities), suggesting that consumer impacts deserve more attention from impact investors. Existing ESG and social impact ratings are essentially unrelated to our economically grounded measures.
Keywords: Corporate Social Impact; Consumer Surplus; Impact Investing; ESG Ratings; Welfare Economics
JEL Codes: D6; J23; L13; L62; L66; L71; L81; L93; M14; Q54
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Firm exit (L19) | Social welfare loss (D69) |
| Firm exit (L19) | Reduction in consumer surplus (D11) |
| Firm exit (L19) | Reduction in worker surplus (J65) |
| Firm exit (L19) | Reduction in externalities (H23) |
| Walmart's grocery business (L81) | Positive social impact (O35) |
| Cigarette companies (L66) | Negative corporate social impact (F64) |
| ESG ratings (G24) | Disconnect with social welfare impacts (H53) |