Corporate Social Responsibility and Voting over Public Goods

This paper analyzes the impact of corporate social responsibility (CSR) on the total provision of public goods in a framework in which consumers who may make such voluntary contributions to public goods via CSR are also voters who decide on the level of taxes to finance publicly provided public goods. The main result indicates that, relative to an economy in which all public goods are publicly financed, the introduction of CSR lowers the total amount of public goods, as voters rationally anticipate that higher CSR will partially offset the consequences of lower public funding. The results offer a cautionary tale about the promotion of CSR in an economy with heterogeneous preferences for the public good.