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

Michele Fioretti (1)

1 ECON - Département d'économie (Sciences Po)

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 welfareenhancing tax with limited pass-through.

Mots clés: benefit corporation law; social impact; welfare analysis; firms' objectives; externalities; structural estimation

Domaines: Economies et finances

Michele Fioretti. Caring or Pretending to Care? Social Impact, Firms' Objectives, and Welfare. Journal of Political Economy, 2022, 130 (11), pp.58. ⟨10.1086/720459⟩. ⟨hal-03791920⟩