To reduce a negative externality, socially responsible households can invest responsibly (SRI), consume responsibly (SRC), or do both. Which is better? In a closed microeconomic model with intertwined product and capital markets, we analyze how responsible households should use SRI and SRC to...

We study whether investors perceive responsible investments (i.e., investments in assets with environmental or social benefits) as luxury goods. We exploit windfall wealth due to inheritance from parental death to obtain plausibly exogenous variations in wealth. We show that windfall wealth...