CSR in an oligopoly with foreign competition: Policy and welfare implications

This paper is concerned with the increasingly active role of governments in shaping and promoting corporate social responsibility (CSR). Introducing the cost of taxation into a governmental decision-making framework, the paper elucidates probable strategic substitutes and complements between CSR promotion and import tariffs, based on a welfare analysis. It shows that there exists an optimal degree of promotion for CSR and an optimal tariff rate imposed on foreign firms, but only if the cost of taxation is relatively low. In particular, it finds that this cost should be kept to a low level in countries that wish to enlarge consumer-oriented CSR initiatives and attract foreign exports.