The Perils of Private Provision of Public Goods

47 Pages Posted: 2 Mar 2020 Last revised: 12 Oct 2020

See all articles by Umit Gurun

Umit Gurun

University of Texas at Dallas

Jordan Nickerson

MIT - Sloan

David H. Solomon

Boston College - Carroll School of Management

Date Written: January 31, 2020

Abstract

We study the consequences of a firm engaging in corporate social responsibility within the firm’s operations, rather than doing so outside the firm through charitable donations. After April 2018 protests, Starbucks enacted policies that anybody could sit in their stores and use the bathroom without making a purchase. Using anonymized cellphone location data, we estimate this led to a 7.0% decline in attendance at Starbucks locations relative to other nearby coffee shops. The effect is 84% larger near homeless shelters, and larger for Starbucks’ wealthier customers. Remaining Starbucks customers spent 4.1% less time per visit. Public urination citations decreased near Starbucks locations, but rates of other minor crimes were unchanged. Our results highlight the difficulties of directly providing public goods instead of relying on a division of labor, as customers are crowded out by non-customers.

Keywords: Public Good, Socially Responsible Investment, ESG investment, Homeless, Starbucks, Location data

JEL Classification: A11, A13, C55, D02, D22, D61, D62, D63, D64, H23, G30, L21, I15, G34

Suggested Citation

Gurun, Umit and Nickerson, Jordan and Solomon, David H., The Perils of Private Provision of Public Goods (January 31, 2020). Available at SSRN: https://ssrn.com/abstract=3531171 or http://dx.doi.org/10.2139/ssrn.3531171

Umit Gurun (Contact Author)

University of Texas at Dallas ( email )

2601 North Floyd Road
Richardson, TX 75083
United States

HOME PAGE: http://www.umitgurun.com

Jordan Nickerson

MIT - Sloan ( email )

100 Main Street
Cambridge, MA 02142
United States

David H. Solomon

Boston College - Carroll School of Management ( email )

140 Commonwealth Avenue
Chestnut Hill, MA 02467
United States

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