Caring or Pretending to Care? Social Impact, Firms’ Objectives, and Welfare

Michele Fioretti

Journal of Political Economy, 2022, vol. 130, issue 11, 2898 - 2942

Abstract: Many firms claim that “social impact” influences their strategies. This paper develops a structural model that quantifies social impact as the sum of surpluses to a firm and its stakeholders. With data from a for-profit firm whose prosocial expenditures are measurable and salient to consumers, the analysis shows that the firm spends prosocially beyond profit maximization, thereby increasing welfare substantially. Incentivizing a standard profit-maximizing firm to behave similarly would require subsidies amounting to 58% of its prosocial expenditures, because consumers’ willingness to pay is relatively inelastic to prosocial expenses. Therefore, social impact resembles a self-imposed welfare-enhancing tax with limited pass-through.

Date: 2022
References: Add references at CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
http://dx.doi.org/10.1086/720459 (application/pdf)
http://dx.doi.org/10.1086/720459 (text/html)
Access to the online full text or PDF requires a subscription.

Related works:
Working Paper: Caring or Pretending to Care? Social Impact, Firms' Objectives, and Welfare (2022)
Working Paper: Caring or Pretending to Care? Social Impact, Firms' Objectives, and Welfare (2022)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ucp:jpolec:doi:10.1086/720459

Access Statistics for this article

More articles in Journal of Political Economy from University of Chicago Press
Bibliographic data for series maintained by Journals Division ().