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This paper examines the welfare implications of corporate social responsibility (CSR) in international markets under imperfect competition. Based on a stylized model of an import‐competing duopolistic market, we show the feasibility of moving toward tariff reductions when both domestic and foreign firms launch CSR initiatives in that their payoffs include not only individual profits, but also the benefits of consumers. For the case where the foreign exporter unilaterally adopts the consumer‐oriented CSR as a strategy, there is a rent‐shifting effect because the foreign firm's payoff increases whereas the domestic firm's profit decreases. In response, the importing country's government raises its tariff on the foreign product. If, instead, the domestic firm adopts the CSR strategy unilaterally, the rent‐shifting effect disappears and both the competing firms’ payoffs increase. We further identify the conditions under which the CSR initiatives of the firms constitute the dominant strategy, leading to a Pareto efficient outcome at which the firms’ payoffs, consumer surplus, and social welfare are at their maximum levels.

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Considering family labor and hired labor as heterogeneous inputs, we present a theoretical framework in which the optimal decisions of a farm household on on-farm family and hired labor, off-farm labor supply, and leisure are determined uniquely and endogenously. Focusing on two alternative settings with and without off-farm employment constraints, we show that imperfect substitutability between family labor and hired labor is not critical to the separation of household production and consumption. The validity of the separation proposition is shown to depend crucially on whether or not the availability of off-farm job opportunities is limited. We further examine how changes in external economic conditions and government policies affect the time allocation decisions of the household, as well as the composition of household income (i.e., on-farm income and off-farm labor earnings).