The Perils of Private Provision of Public Goods

Abstract

We study the consequences of a firm engaging in corporate social responsibility within the firm’s operations, rather than doing so outside the firm through charitable donations. After April 2018 protests, Starbucks enacted policies that anybody could sit in their stores and use the bathroom without making a purchase. Using anonymized cellphone location data, we estimate this led to a 7.0% decline in attendance at Starbucks locations relative to other nearby coffee shops. The effect is 84% larger near homeless shelters, and larger for Starbucks’ wealthier customers. Remaining Starbucks customers spent 4.1% less time per visit. Public urination citations decreased near Starbucks locations, but rates of other minor crimes were unchanged. Our results highlight the difficulties of directly providing public goods instead of relying on a division of labor, as customers are crowded out by non-customers.

Keywords: Public Good, Socially Responsible Investment, ESG investment, Homeless, Starbucks, Location data

JEL Classification: A11, A13, C55, D02, D22, D61, D62, D63, D64, H23, G30, L21, I15, G34