Working Paper: NBER ID: w31913
Authors: Emanuele Colonnelli; Timothy McQuade; Gabriel Ramos; Thomas Rauter; Olivia Xiong
Abstract: We conduct a field experiment in partnership with the largest job platform in Brazil to study how environmental, social, and governance (ESG) practices of firms affect talent allocation. We find both an average job-seeker's preference for ESG and a large degree of heterogeneity across socioeconomic groups, with the strongest preference displayed by highly educated, white, and politically liberal individuals. We combine our experimental estimates with administrative matched employer-employee microdata and estimate an equilibrium model of the labor market. Counterfactual analyses suggest ESG practices increase total economic output and worker welfare, while increasing the wage gap between skilled and unskilled workers.
Keywords: ESG; Labor Market; Talent Allocation; Field Experiment; Brazil
JEL Codes: D20; G30; G40; J10; P00
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| higher education, race, and political affiliation influence the strength of preference (I24) | job seekers' preferences for ESG practices (J68) |
| ESG practices (G38) | worker welfare (J38) |
| ESG practices (G38) | total economic output (E23) |
| ESG practices (G38) | wage gap between skilled and unskilled workers (J31) |
| skilled workers value firm ESG activities as equivalent to a 0.150-point increase in log wages (J24) | skilled workers' valuation of ESG activities (J24) |
| unskilled workers value firm ESG activities as equivalent to a 0.014-point increase in log wages (J39) | unskilled workers' valuation of ESG activities (J28) |
| introduction of ESG practices enhances allocative efficiency in the labor market (J29) | wage differentials and total output (J31) |
| ESG adoption results in a distribution of labor that is more efficient than in a baseline scenario without ESG (F62) | labor distribution efficiency (J39) |
| job seekers exhibit a strong preference for firms with ESG practices (J68) | value of ESG signals equating to approximately 10% of average wages (J31) |