The Role of Income Distribution in the Diffusion of Corporate Social Responsibility

The purpose of this paper is to investigate the link between CSR growth and income distribution. We present a general equilibrium model where social responsibility enters both firms' and consumers' decisions. The model admits the existence of multiple equilibria, each of them characterized by a different diffusion of CSR. We study the conditions under which there exists a virtuous circle which ties increases in the diffusion of CSR to reductions in income inequality and viceversa. Under certain circumstances, any policy which promotes the diffusion of CSR induces a reduction of income inequality. By contrast, when such conditions are not satisfied, only redistributive policies may generate the virtuous circle.