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Polarization, Purpose and Profit

Author

Listed:
  • Daniel Ferreira

    (London School of Economics, CEPR and ECGI)

  • Radoslawa Nikolowa

    (Queen Mary University of London)

Abstract

We present a model in which firms compete for workers who have a taste for a nonpecuniary job attribute, such as purpose, sustainability, ES/CSR, or working conditions. Firms can invest in flexible production technologies that allow them to create jobs with different levels of the desirable job attribute. In a competitive equilibrium, flexible firms become polarized and cater to workers with extreme preferences for the job attribute. Firm polarization increases with technological progress and industry concentration. More polarized sectors have higher profits, lower average wages, and a lower labor share of value added. Traditional investors prefer to buy shares in polarized sectors, while socially responsible investors prefer to invest in less polarized sectors. Firms in more polarized sectors are more valuable and have higher stock returns than firms in less polarized sectors.

Suggested Citation

  • Daniel Ferreira & Radoslawa Nikolowa, 2024. "Polarization, Purpose and Profit," Working Papers 974, Queen Mary University of London, School of Economics and Finance.
    • Handle: RePEc:qmw:qmwecw:974
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    File URL: https://www.qmul.ac.uk/sef/media/econ/research/workingpapers/2024/wp974.pdf
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    References listed on IDEAS

    as
    1. Di Giuli, Alberta & Kostovetsky, Leonard, 2014. "Are red or blue companies more likely to go green? Politics and corporate social responsibility," Journal of Financial Economics, Elsevier, vol. 111(1), pages 158-180.
    2. Jason Sockin, 2022. "Show Me the Amenity: Are Higher-Paying Firms Better All Around?," CESifo Working Paper Series 9842, CESifo.
    Full references (including those not matched with items on IDEAS)

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