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Ecolabeling, consumers' preferences and taxation

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Author Info

  • Schumacher, Ingmar

Abstract

Ecolabeling is a means of reducing the information gap between consumers and producers. We study the implication of ecolabeling a supposedly green good for a consumer's allocation of income between a dirty and the supposedly green good. In the model, the role of the ecolabel is to help product differentiation, to give reliable information and to reduce informational asymmetries. We show that a conscious consumer (someone with a stronger green attitude or quality concerns) demands more ecolabeled goods; price-oriented consumers demand fewer ecolabeled goods; a subsidy (resp. tax) on the price of the ecolabeled (resp. dirty) good leads to a larger consumption of the ecolabeled (resp. dirty) good whereas it may increase or decrease the demand for the dirty (resp. ecolabeled) good, depending on whether the consumer views both goods as gross substitutes or complements. We then use a cross-individual dataset of 22,568 consumers and show that the demand for ecolabeled goods increases strongly with the consciousness of the consumer but decreases for price-oriented consumers. Ecolabel-oriented consumers feel more informed; more conscious consumers prefer a subsidy on green goods and a tax on dirty goods; price-oriented consumers do not care about the green subsidy but would vote against a tax on the dirty goods.

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Bibliographic Info

Article provided by Elsevier in its journal Ecological Economics.

Volume (Year): 69 (2010)
Issue (Month): 11 (September)
Pages: 2202-2212

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Handle: RePEc:eee:ecolec:v:69:y:2010:i:11:p:2202-2212

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Web page: http://www.elsevier.com/locate/ecolecon

Related research

Keywords: Ecolabeling Taxation Consumer choice;

References

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  1. Nyborg, Karine & Howarth, Richard B. & Brekke, Kjell Arne, 2003. "Green consumers and public policy: On socially contingent moral motivation," Memorandum 31/2003, Oslo University, Department of Economics.
  2. Matthew J. Kotchen & Michael R. Moore, 2004. "Private Provision of Environmental Public Goods: Household Participation in Green-Electricity Programs," Department of Economics Working Papers 2004-07, Department of Economics, Williams College.
  3. Hamilton, Stephen F. & Zilberman, David, 2006. "Green markets, eco-certification, and equilibrium fraud," Journal of Environmental Economics and Management, Elsevier, vol. 52(3), pages 627-644, November.
  4. Bjorner, Thomas Bue & Hansen, L.G.Lars Garn & Russell, Clifford S., 2004. "Environmental labeling and consumers' choice--an empirical analysis of the effect of the Nordic Swan," Journal of Environmental Economics and Management, Elsevier, vol. 47(3), pages 411-434, May.
  5. William Harbaugh & Arik Levinson & David Wilson, 2000. "Reexamining the Empirical Evidence for an Environmental Kuznets Curve," Working Papers gueconwpa~00-00-07, Georgetown University, Department of Economics.
  6. Benno Torgler & Maria A. Garcia-Valiñas, 2005. "The Determinants of Individuals’ Attitudes Towards Preventing Environmental Damage," Working Papers 2005.110, Fondazione Eni Enrico Mattei.
  7. Cesare Dosi & Michele Moretto, 2001. "Is Ecolabelling a Reliable Environmental Policy Measure?," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 18(1), pages 113-127, January.
  8. De, Sankar & Nabar, Prafulla, 1991. "Economic implications of imperfect quality certification," Economics Letters, Elsevier, vol. 37(4), pages 333-337, December.
  9. Matthew J. Kotchen, 2003. "Green Markets and Private Provision of Public Goods," Department of Economics Working Papers 2003-05, Department of Economics, Williams College.
  10. Ingmar Schumacher, 2009. "The dynamics of Environmentalism and the Environment," Working Papers hal-00392379, HAL.
  11. Brécard, Dorothée & Hlaimi, Boubaker & Lucas, Sterenn & Perraudeau, Yves & Salladarré, Frédéric, 2009. "Determinants of demand for green products: An application to eco-label demand for fish in Europe," Ecological Economics, Elsevier, vol. 69(1), pages 115-125, November.
  12. Soham Baksi & Pinaki Bose, 2007. "Credence Goods, Efficient Labelling Policies, and Regulatory Enforcement," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 37(2), pages 411-430, June.
  13. Darby, Michael R & Karni, Edi, 1973. "Free Competition and the Optimal Amount of Fraud," Journal of Law and Economics, University of Chicago Press, vol. 16(1), pages 67-88, April.
  14. Cathy R. Wessells & Robert J. Johnston & Holger Donath, 1999. "Assessing Consumer Preferences for Ecolabeled Seafood: The Influence of Species, Certifier, and Household Attributes," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 81(5), pages 1084-1089.
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  16. Brian Roe & Ian Sheldon, 2007. "Credence Good Labeling: The Efficiency and Distributional Implications of Several Policy Approaches," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 89(4), pages 1020-1033.
  17. Amacher, Gregory S. & Koskela, Erkki & Ollikainen, Markku, 2004. "Environmental quality competition and eco-labeling," Journal of Environmental Economics and Management, Elsevier, vol. 47(2), pages 284-306, March.
  18. Cason, T.N. & Gangadharan, L., 1999. "Environmental Labeling and Incomplete Consumer Information in Laboratory Markets," Department of Economics - Working Papers Series 708, The University of Melbourne.
  19. Jeffrey R. Blend & Eileen O. van Ravenswaay, 1999. "Measuring Consumer Demand for Ecolabeled Apples," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 81(5), pages 1072-1077.
  20. Chris Arnot & Peter C. Boxall & Sean B. Cash, 2006. "Do Ethical Consumers Care About Price? A Revealed Preference Analysis of Fair Trade Coffee Purchases," Canadian Journal of Agricultural Economics/Revue canadienne d'agroeconomie, Canadian Agricultural Economics Society/Societe canadienne d'agroeconomie, vol. 54(4), pages 555-565, December.
  21. Teisl, Mario F. & Roe, Brian & Hicks, Robert L., 2002. "Can Eco-Labels Tune a Market? Evidence from Dolphin-Safe Labeling," Journal of Environmental Economics and Management, Elsevier, vol. 43(3), pages 339-359, May.
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Citations

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Cited by:
  1. Delacote, Philippe & Montagné-Huck, Claire, 2012. "Political consumerism and public policy: Good complements against market failures?," Ecological Economics, Elsevier, vol. 73(C), pages 188-193.
  2. Xiaogu Li & Christopher Clark & Kimberly Jensen & Steven Yen, 2014. "Will consumers follow climate leaders? The effect of manufacturer participation in a voluntary environmental program on consumer preferences," Environmental Economics and Policy Studies, Society for Environmental Economics and Policy Studies - SEEPS, vol. 16(1), pages 69-87, January.
  3. Fuerst, Franz & McAllister, Pat, 2011. "Eco-labeling in commercial office markets: Do LEED and Energy Star offices obtain multiple premiums?," Ecological Economics, Elsevier, vol. 70(6), pages 1220-1230, April.
  4. Slađana Pavlinović, 2013. "Signalling Green Technology Through Price And Eco-Label," Annals - Economy Series, Constantin Brancusi University, Faculty of Economics, vol. 6, pages 87-94, December.
  5. repec:hal:wpaper:hal-00593744 is not listed on IDEAS

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