Substitution Between Corporate Social Responsibility Activities: Evidence from Hiring and Mistreating Unauthorized Workers and Pollution

We argue substitution can exist among corporate social responsibility (CSR) investments, and exogenously increasing one CSR investment could lead to a decrease in another CSR investment. We provide evidence using the U.S. states’ staggered adoptions of E-Verify mandates, which curtail a labor-related social bad by reducing the hiring of unauthorized workers and related workplace abuses. We find the mandate leads to an increase in plant-level pollution, an environmental social bad, and the effect is stronger when the mandate applies to more employers, for plants in states with more unauthorized workers in the labor force, and for plants with jobs that are inherently more hazardous.

This paper was accepted by Suraj Srinivasan, accounting.

Funding: This work was supported by the Hong Kong Research Grants Council [Project 24502422].

Supplemental Material: The internet appendix and data files are available at https://doi.org/10.1287/mnsc.2022.02310.