When is Social Responsibility Socially Desirable?

58 Pages Posted: 20 Jul 2015 Last revised: 12 Aug 2015

See all articles by Jean-Etienne de Bettignies

Jean-Etienne de Bettignies

Queen's University - Smith School of Business

David T. Robinson

Fuqua School of Business, Duke University; National Bureau of Economic Research (NBER); Duke Innovation & Entrepreneurship Initiative

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Date Written: July 2015

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.

Suggested Citation

de Bettignies, Jean-Etienne and Robinson, David T., When is Social Responsibility Socially Desirable? (July 2015). NBER Working Paper No. w21364, Available at SSRN: https://ssrn.com/abstract=2633320

Jean-Etienne De Bettignies (Contact Author)

Queen's University - Smith School of Business ( email )

Smith School of Business - Queen's University
143 Union Street
Kingston, Ontario K7L 3N6
Canada

David T. Robinson

Fuqua School of Business, Duke University ( email )

100 Fuqua Drive
Durham, NC 27708-0120
United States
919-660-8023 (Phone)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Duke Innovation & Entrepreneurship Initiative ( email )

215 Morris St., Suite 300
Durham, NC 27701
United States

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