Three essays on ethical consumption and social responsibility

A recent literature on Corporate Social Responsibility in economics – reviewed in Chapter 1 – shows that not all the consumers who declare to be socially concerned purchase ethical products. Such divergence does not seem to be fully explained by potential price differences. Starting from this consideration, we develop Chapters 2 and Chapter 3. In Chapter 2 we present a partial equilibrium model in which firms choose either to be ethical (i.e. to commit to Corporate Social Responsibility) or standard. The group of socially concerned consumers desire to have a market where ethical firms operate, but they consider the goods produced by the two types of firms as entirely homogeneous. We investigate how the size of the group of socially concerned consumers affects firms' decisions to commit to ethical production. In Chapter 3, we present a general equilibrium model in which an increase in income may induce socially concerned consumers to switch from standard to ethical products, rather than consuming more standard goods. The economy is divided into two sectors -- the standard and the ethical -- and only a group of workers receive a share of profits in addition to their wages. We study the conditions under which there exists a virtuous circle which ties together increases in the size of the ethical sector to reductions in income inequality.