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Moral hazard and moral motivation: Corporate social responsibility as labor market screening

  • Brekke, Kjell Arne

    ()

    (The Ragnar Frisch Centre for Economic Research)

  • Nyborg, Karine

    ()

    (The Ragnar Frisch Centre for Economic Research)

Morally motivated individuals behave more cooperatively than predicted by standard theory. Hence,if a firm can attract workers who are strongly motivated by ethical concerns, moral hazard problems like shirking can be reduced. We show that employers may be able to use the firm’s corporate social responsibility profile as a screening device to attract more productive workers. Both pooling and separating equilibria are possible. Even when a substantial share of the workers have no moral motivation whatsoever, such screening may in fact drive every firm with a low social responsibility profile out of business.

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File URL: http://www.sv.uio.no/econ/english/research/unpublished-works/working-papers/pdf-files/2004/Memo-25-2004.pdf
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Paper provided by Oslo University, Department of Economics in its series Memorandum with number 25/2004.

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Length: 32 pages
Date of creation: 06 Apr 2005
Date of revision:
Publication status: Published in Resource and Energy Economics, 2008, pages 509-526.
Handle: RePEc:hhs:osloec:2004_025
Contact details of provider: Postal: Department of Economics, University of Oslo, P.O Box 1095 Blindern, N-0317 Oslo, Norway
Phone: 22 85 51 27
Fax: 22 85 50 35
Web page: http://www.oekonomi.uio.no/indexe.html
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  2. Ernst Fehr & Klaus M. Schmidt, . "A Theory of Fairness, Competition and Cooperation," IEW - Working Papers 004, Institute for Empirical Research in Economics - University of Zurich.
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  8. Nyborg, Karine, 2000. "Homo Economicus and Homo Politicus: interpretation and aggregation of environmental values," Journal of Economic Behavior & Organization, Elsevier, vol. 42(3), pages 305-322, July.
  9. Karine Nyborg & Mari Rege, 2001. "Does Public Policy Crowd Out Private Contributions to Public Goods?," Discussion Papers 300, Research Department of Statistics Norway.
  10. Sugden, Robert, 1984. "Reciprocity: The Supply of Public Goods through Voluntary Contributions," Economic Journal, Royal Economic Society, vol. 94(376), pages 772-87, December.
  11. John W. Maxwell & Thomas P Lyon & Steven C.. Hackett, 1995. "Self-Regulation and Social Welfare: The Political Economy of Corporate Environmentalism," University of Chicago - George G. Stigler Center for Study of Economy and State 122, Chicago - Center for Study of Economy and State.
  12. Axel Ockenfels & Gary E. Bolton, 2000. "ERC: A Theory of Equity, Reciprocity, and Competition," American Economic Review, American Economic Association, vol. 90(1), pages 166-193, March.
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  14. Joseph E. Stiglitz, 1973. "The Theory of 'Screening', Education, and the Distribution of Income," Cowles Foundation Discussion Papers 354, Cowles Foundation for Research in Economics, Yale University.
  15. Spence, A Michael, 1973. "Job Market Signaling," The Quarterly Journal of Economics, MIT Press, vol. 87(3), pages 355-74, August.
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