Impact Trickles Down: A General Equilibrium Theory of Stakeholder Exit and Engagement
How do purpose-driven stakeholders induce reform? Using a multi-sided matching equilibrium, we show that whether they exit or engage depends on whether social harm scales with productivity. When harm is uncorrelated—an implicit assumption in most literature—purpose-driven stakeholders engage and compensating differentials adjust. But when harm scales with production, high-productivity firms outbid others for profit-driven stakeholders to avoid mitigation. Purpose-driven stakeholders exit—a seemingly ineffective action at the firm level but whose impact trickles down the productivity ladder and across stakeholder types. This necessitates a multi-sided framework, rationalizes puzzling findings, and explains why studies underestimate the aggregate impact of exit.
-
-
Copy CitationBriana Chang and Harrison Hong, "Impact Trickles Down: A General Equilibrium Theory of Stakeholder Exit and Engagement," NBER Working Paper 35081 (2026), https://doi.org/10.3386/w35081.Download Citation
More from the NBER
In addition to working papers, the NBER disseminates affiliates’ latest findings through a range of free periodicals — the NBER Reporter, the NBER Digest, the Bulletin on Health, and the Bulletin on Entrepreneurship — as well as online conference reports, video lectures, and interviews.
