Abstract
AbstractTrade unions distort a profit‐maximizing firm's input choice. The nature of the resulting inefficiency depends on whether there are wage negotiations or there is efficient bargaining. Moreover, trade unions redistribute income and thereby affect welfare. If firms also pursue Corporate Social Responsibility (CSR) objectives, input choices may be distorted already in the absence of collective bargaining. Adopting a positive perspective, we show that CSR objectives, which induce a firm to expand production, have ambiguous wage and employment consequences in case of wage negotiations and raise employment if there is efficient bargaining. Importantly from a normative vantage point, such CSR objectives make a welfare‐enhancing role of trade unions more likely in the presence of wage negotiations. The reverse is true in case of efficient bargaining.
Highlights
Corporate Social Responsibility (CSR) activities have become "mainstream" (The Economist 2008)
We show that the welfare effects of trade unions that arise for a profit-maximising firm may no longer occur if it pursues CSR objectives
Comparing Results 4 and 7 indicates that the welfare effects of trade unions in the absence of CSR objectives tend to depend on the scope of bargaining
Summary
Corporate Social Responsibility (CSR) activities have become "mainstream" (The Economist 2008). According to a KPMG (2017) survey, most large firms and more than 90 per cent of the 250 globally leading firms report on corporate responsibility. These widespread CSR (reporting) activities are an indicator of the almost universal acceptance of such responsibility. 8) asserts that CSR "is the continuing commitment by business to contribute to economic development while improving the quality of life of the workforce and their families as well as of the community and society at large." These characterisations illuminate the relevance of employees. The question of whether CSR activities can alter the behaviour of (potential) employees in order to enhance the firm's payoff has been debated intensely (Kitzmueller and Shimshack 2012)
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