Is the CSR Craze Good for Society? The Welfare Economic Approach to Corporate Social Responsibility

Welfare economic analysis of Corporate Social Responsibility (CSR) equates CSR with the provision of private goods bundled with provision of public goods (or, in the symmetrical case, bundled with the curtailment of public bads). Two common examples are cause-related marketing and "green goods'' where private goods are sold at premiums that are then used to pay for provision of public goods and/or curtailment of public bads. This paper expands upon the model of Besley and Ghatak (2007) for the case of imperfect government to develop a complete typology for analyzing whether the provision/curtailment of public goods/bads will be best served by companies (through CSR), by imperfect governments or by non-profit organizations. Finally the paper discusses the main differences between the welfare economic approach to CSR and the general multi-disciplinary CSR literature.