Impact Trickles Down: A General Equilibrium Theory of Stakeholder Exit and Engagement

Briana Chang and Harrison Hong

No 35081, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: How do purpose-driven stakeholders induce reform? Using a multi-sided matching equilibrium, we show that whether they exit or engage depends on whether social harm scales with productivity. When harm is uncorrelated—an implicit assumption in most literature—purpose-driven stakeholders engage and compensating differentials adjust. But when harm scales with production, high-productivity firms outbid others for profit-driven stakeholders to avoid mitigation. Purpose-driven stakeholders exit—a seemingly ineffective action at the firm level but whose impact trickles down the productivity ladder and across stakeholder types. This necessitates a multi-sided framework, rationalizes puzzling findings, and explains why studies underestimate the aggregate impact of exit.

JEL-codes: G0 G19 G20 G3 G35 G39 H4 H40 (search for similar items in EconPapers)
Date: 2026-04
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