The Causal Effect of Income Growth on Consumer Social Responsibility

Abstract

We investigate whether income growth causes an increased concern for mitigating negative externalities from consumption. We conduct laboratory market experiments in which firms and consumers can exchange products that differ in the degree to which they diminish negative external impacts at the expense of higher production costs. Our treatments exogenously vary consumers’ income. The data reveal that growth in consumer income causes an increase in the share of socially responsible consumption. Such a causal relationship is important from a policy perspective, as it implies that some negative external impacts of consumption activity can be mitigated as societies experience economic growth.

Keywords: Negative externalities, social and environmental responsibility, income growth, normal goods, laboratory experiment

JEL Classification: C92, D31, D62, M14