The Impact of Social Enterprises on Output, Employment, and Welfare

This contribution highlights the welfare effects of the new entrepreneurial form in terms of employment and output. In the first stance it is crucial to single out their institutional characteristics in terms of objectives, control rights and governance. First, the socialisation of the firm capital due to the non-distribution constraint and the participatory governance linked to the social objective go in the direction of accruing the social content of their operation, employing resources, both human and financial, specifically directed to the satisfaction of social needs. Second, the non-distribution constraint and the public benefit objective have important consequences on the ability of social enterprises to attract resources and to distribute their surpluses not only by means of market exchanges, but also by bypassing the rule of equivalence, either absorbing volunteer labour and donations, or distributing resources to non-paying demand and toward other social aims. The allocative and distributive mechanisms allowing the accomplishment of the increase in production of meritorious goods and the reduction of poverty are likely to be unique to the working of social enterprises. Hence they need careful analysis. While these effects have been often reduced under the label of positive external effects, this interpretation is not satisfactory since the most relevant public benefit consequences of the operation of social enterprises are not merely unintended, but often stem out of deliberate choices and strategies informed by other-regarding and other pro-social motivations.