Corporate Social Responsibility as a Signal in the Labor Market

Working for a firm engaged in Corporate Social Responsibility (CSR) appeals to potential workers by boosting their self-image and sense of purpose. We propose an additional mechanism: CSR signals a firm's future treatment of workers. Our model links CSR engagement with a firm's propensity to support workers during unforeseen times of need. Under this assumption, a potential future need of the worker leads to more firms engaging in CSR and to a higher workers' willingness to accept lower wages. Our experiment manipulates potential future needs. While the aggregate analysis does not support our theory, exploratory analysis reveals that male workers respond as predicted, whereas female workers do not. Consistently, in a risky environment, male employers increase their CSR engagement, which raises the acceptance rate among male workers. These results are not observed among female employers and workers.