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Environmental corporate social responsibility, firm dynamics and wage inequality

Author

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  • Ee, Mong Shan
  • Chao, Chi-Chur
  • Wang, Leonard F.S.
  • Yu, Eden S.H.

Abstract

Based on a general-equilibrium framework, this paper examines the income distributional effect of firms which commit to environmental corporate social responsibility (ECSR) investments. In the short run with fixed number of firms, ECSR investment raises capital rental cost and hence widens wage inequality between skilled and unskilled workers via the factor substitution effect, while the increased capital cost causes firms to exit in the long run. This releases capital and hence lowers the capital rental cost. Thus, the wage gap can be mitigated or even narrowed by a rise in unskilled wage and a drop in skilled wage via the firm-exit effect. This theoretical prediction is confirmed by the empirical result.

Suggested Citation

  • Ee, Mong Shan & Chao, Chi-Chur & Wang, Leonard F.S. & Yu, Eden S.H., 2018. "Environmental corporate social responsibility, firm dynamics and wage inequality," International Review of Economics & Finance, Elsevier, vol. 56(C), pages 63-74.
    • Handle: RePEc:eee:reveco:v:56:y:2018:i:c:p:63-74
    DOI: 10.1016/j.iref.2018.03.018
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    2. Cao Thi Mien Thuy & Nguyen Vinh Khuong & Nguyen Thi Canh & Nguyen Thanh Liem, 2022. "The mediating effect of stock price crash risk on the relationship between corporate social responsibility and cost of equity moderated by state ownership: Moderated‐mediation analysis," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 29(5), pages 1384-1395, September.
    3. Xu, Lili & Chen, Yuyan & Lee, Sang-Ho, 2022. "Emission tax and strategic environmental corporate social responsibility in a Cournot–Bertrand comparison," Energy Economics, Elsevier, vol. 107(C).
    4. Kwasi Amoako & Elvis Boateng, 2022. "Analysis of the effectiveness of Corporate Social Responsibility in brand marketing with AAKER Brand Equity and Daisy Wheel Models," Technium Social Sciences Journal, Technium Science, vol. 30(1), pages 484-519, April.
    5. Leonard F. S. Wang & Ji Sun, 2023. "Corporate profit tax, firm entry with unemployment, and income inequality," Bulletin of Economic Research, Wiley Blackwell, vol. 75(2), pages 380-392, April.
    6. Dongdong Li & Leonard F. S. Wang, 2022. "Does environmental corporate social responsibility (ECSR) promote green product and process innovation?," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 43(5), pages 1439-1447, July.
    7. Xu, Lili & Lee, Sang-Ho, 2021. "Strategic Corporate Social Responsibility by a Multinational Firm and International Privatization Policies," MPRA Paper 105651, University Library of Munich, Germany.
    8. Chokri Aloui & Khaïreddine Jebsi, 2022. "Does corporate social responsibility solve the chicken‐and‐egg problem for a two‐sided platform?," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 43(7), pages 3235-3256, October.
    9. Jia Meng & ZhongXiang Zhang, 2022. "Corporate Environmental Information Disclosure and Investor Response: Empirical Evidence from China's Capital Market," Working Papers 2022.03, Fondazione Eni Enrico Mattei.
    10. Ding Chen & Leonard F. S. Wang & Ji Sun, 2023. "Does CSR influence privatization wave?," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 44(2), pages 1088-1097, March.
    11. Jonathan Luffarelli & Panos Markou & Antonios Stamatogiannakis & Dilney Gonçalves, 2019. "The effect of corporate social performance on the financial performance of business‐to‐business and business‐to‐consumer firms," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 26(6), pages 1333-1350, November.
    12. Zhaoyang Guo & Siyu Hou & Qingchang Li, 2020. "Corporate Social Responsibility and Firm Value: The Moderating Effects of Financial Flexibility and R&D Investment," Sustainability, MDPI, vol. 12(20), pages 1-17, October.
    13. Rong Liu & Feng He & Jianyu Ren, 2021. "Promoting or Inhibiting? The Impact of Enterprise Environmental Performance on Economic Performance: Evidence from China’s Large Iron and Steel Enterprises," Sustainability, MDPI, vol. 13(11), pages 1-16, June.
    14. Meng, Jia & Zhang, ZhongXiang, 2022. "Corporate environmental information disclosure and investor response: Evidence from China's capital market," Energy Economics, Elsevier, vol. 108(C).
    15. Hazem Ahmed Khairy & Yehia Elzek & Nadir Aliane & Mohamed Fathy Agina, 2023. "Perceived Environmental Corporate Social Responsibility Effect on Green Perceived Value and Green Attitude in Hospitality and Tourism Industry: The Mediating Role of Environmental Well-Being," Sustainability, MDPI, vol. 15(6), pages 1-17, March.
    16. Rong Liu & Min Zhao & Jianyu Ren, 2022. "The Influence Mechanism of Corporate Environmental Responsibility on Corporate Performance: The Mediation Effect of Green Innovation," Sustainability, MDPI, vol. 14(17), pages 1-27, September.
    17. Chi‐Chur Chao & Leonard F. S. Wang, 2022. "Corporate governance, firm dynamics, and wage inequality," Manchester School, University of Manchester, vol. 90(3), pages 341-353, June.

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    More about this item

    Keywords

    Environmental CSR; Firm exit; Wage inequality;
    All these keywords.

    JEL classification:

    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L33 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Comparison of Public and Private Enterprise and Nonprofit Institutions; Privatization; Contracting Out
    • R23 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Regional Migration; Regional Labor Markets; Population

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