19 March 2018

New study by DERG in European Economic Review

John Rand, Finn Tarp and Neda Trifkovic from the Development Economics Research Group (DERG) at the Department of Economics have together with Carol Newman from Trinity College, Dublin published a new research study in the European Economics Review (EER), which is attracting a lot of attention.

Their paper titled “The transmission of socially responsible behaviour through international trade” is yet another quality research output from DERG’s more than 17 years of research collaboration in Vietnam, covering a range of areas and topics. The new EER paper explores the relationship between corporate social responsibility (CSR) practices of domestic Vietnamese firms and their engagement with foreign markets, relying on a variety of data sources. They include a survey of more 4,500 manufacturing firms in Vietnam. The survey was specially designed by the research team to explore issues of innovation and corporate social responsibility (CSR), and it links up to the national enterprise survey implemented annually with the General Statistics Organisation (GSO).

More specifically, the authors develop a measure of CSR that combines compliance with labour standards, management commitment to CSR, and corporate community related actions; and find a strong relationship between this measure and participation in international markets. Results suggest that both exporting and importing firms engage in more CSR activities. Conditional on exporting, it is shown that Vietnamese exporters to China are less involved in CSR related activities, and that exporters to the US engage in more community related CSR, likely reflecting differences in stakeholder preferences across markets.

In sum, the study offers evidence on a so far overlooked effect associated with international trade. This externality provides a further justification for policies that encourage increased integration of domestic firms with global markets. Firms that import inputs or export output are in general more likely to pursue CSR activities. This means that policies that facilitate engagement with global markets will not only benefit the firms involved in terms of productivity and profits, they will also have knock-on effects to the benefit of society more broadly.

You can read the entire paper here