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

Author

Listed:
  • Brekke, Kjell Arne

    (The Ragnar Frisch Centre for Economic Research)

  • Nyborg, Karine

    (The Ragnar Frisch Centre for Economic Research)

Abstract

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.

Suggested Citation

  • Brekke, Kjell Arne & Nyborg, Karine, 2005. "Moral hazard and moral motivation: Corporate social responsibility as labor market screening," Memorandum 25/2004, Oslo University, Department of Economics.
    • Handle: RePEc:hhs:osloec:2004_025
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    File URL: http://www.sv.uio.no/econ/english/research/unpublished-works/working-papers/pdf-files/2004/Memo-25-2004.pdf
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    References listed on IDEAS

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    Cited by:

    1. Renneboog, Luc & Ter Horst, Jenke & Zhang, Chendi, 2008. "The price of ethics and stakeholder governance: The performance of socially responsible mutual funds," Journal of Corporate Finance, Elsevier, vol. 14(3), pages 302-322, June.
    2. Kjetil Telle, 2006. "“It Pays to be Green” – A Premature Conclusion?," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 35(3), pages 195-220, November.
    3. Jérôme Ballet & Damien Bazin & Abraham Lioui & David Touahri, 2006. "Taxation and The Crowding-Out Effect of Corporate Social Responsibility," Working Papers halshs-00113856, HAL.
    4. Roland Bénabou & Jean Tirole, 2010. "Individual and Corporate Social Responsibility," Economica, London School of Economics and Political Science, vol. 77(305), pages 1-19, January.
    5. Pierre Fleckinger & Matthieu Glachant, 2009. "La responsabilité sociale de l’entreprise et les accords volontaires sont-ils complémentaires ?," Économie et Prévision, Programme National Persée, vol. 190(4), pages 95-105.
    6. Giulio Pedrini, 2017. "Law and economics of training: a taxonomy of the main legal and institutional tools addressing suboptimal investments in human capital development," European Journal of Law and Economics, Springer, vol. 43(1), pages 83-105, February.
    7. Thomas P. Lyon & John W. Maxwell, 2008. "Corporate Social Responsibility and the Environment: A Theoretical Perspective," Review of Environmental Economics and Policy, Association of Environmental and Resource Economists, vol. 2(2), pages 240-260, Summer.
    8. Markus Kitzmueller, 2008. "Economics and Corporate Social Responsibility," Economics Working Papers ECO2008/37, European University Institute.
    9. Renneboog, Luc & Ter Horst, Jenke & Zhang, Chendi, 2011. "Is ethical money financially smart? Nonfinancial attributes and money flows of socially responsible investment funds," Journal of Financial Intermediation, Elsevier, vol. 20(4), pages 562-588, October.
    10. Isamu Okada, 2011. "An Agent-Based Model of Sustainable Corporate Social Responsibility Activities," Journal of Artificial Societies and Social Simulation, Journal of Artificial Societies and Social Simulation, vol. 14(3), pages 1-4.
    11. Xia Cao & Dan Lv & Zeyu Xing, 2020. "Innovative Resources, Promotion Focus and Responsible Innovation: The Moderating Roles of Adaptive Governance," Sustainability, MDPI, vol. 12(7), pages 1-19, April.
    12. Martin Daniel Siyaranamual, 2007. "The Economics of Corporate Social Responsibility (CSR): Selling to Someone who Has Personal Valuation," Working Papers in Economics and Development Studies (WoPEDS) 200706, Department of Economics, Padjadjaran University, revised Jun 2007.
    13. Linda Yu, 2014. "Performance Of Socially Responsible Mutual Funds," Global Journal of Business Research, The Institute for Business and Finance Research, vol. 8(3), pages 9-17.
    14. Renneboog, Luc & Ter Horst, Jenke & Zhang, Chendi, 2008. "Socially responsible investments: Institutional aspects, performance, and investor behavior," Journal of Banking & Finance, Elsevier, vol. 32(9), pages 1723-1742, September.

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    More about this item

    Keywords

    Self-image; teamwork; shirking; voluntary abatement;
    All these keywords.

    JEL classification:

    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • D62 - Microeconomics - - Welfare Economics - - - Externalities
    • D64 - Microeconomics - - Welfare Economics - - - Altruism; Philanthropy; Intergenerational Transfers
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • Q50 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - General
    • Z13 - Other Special Topics - - Cultural Economics - - - Economic Sociology; Economic Anthropology; Language; Social and Economic Stratification

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