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Promoting Demand for Organic Food Under Preference and Income Heterogeneity

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  • Eerola, Essi
  • Huhtala, Anni

Abstract

We examine the design of policies for promoting the consumption of green products under preference and income heterogeneity using organic products as an example. Two instruments are considered: a price subsidy for the organic products and a tax on the conventional products. Under income disparity, consumers with high income always prefer a socially optimal subsidy to a socially optimal tax, while low-income consumers prefer a tax on conventional products. When environmental policy is determined by the median voter, the policies implemented tend to be stricter than socially optimal policies if income differences are large.

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Bibliographic Info

Paper provided by European Association of Agricultural Economists in its series 2005 International Congress, August 23-27, 2005, Copenhagen, Denmark with number 24664.

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Date of creation: 2005
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Handle: RePEc:ags:eaae05:24664

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Keywords: taxation; preference heterogeneity; income disparity; Demand and Price Analysis; Food Consumption/Nutrition/Food Safety;

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  1. Pauline M. Ippolito, 2003. "Asymmetric Information in Product Markets: Looking to Other Sectors for Institutional Approaches," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 85(3), pages 731-736.
  2. Gary D. Thompson & Julia Kidwell, 1998. "Explaining the Choice of Organic Produce: Cosmetic Defects, Prices, and Consumer Preferences," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 80(2), pages 277-287.
  3. Thomas Bue Bjorner & Lars Garn Hansen & Clifford S. Russell, 2002. "Environmental Labelling and Consumer's Choice - An Empirical Analysis of the Effect of the Nordic Swan," Vanderbilt University Department of Economics Working Papers 0203, Vanderbilt University Department of Economics.
  4. Nyborg, Karine & Howarth, Richard B. & Brekke, Kjell Arne, 2006. "Green consumers and public policy: On socially contingent moral motivation," Resource and Energy Economics, Elsevier, vol. 28(4), pages 351-366, November.
  5. Brooks, Nancy & Sethi, Rajiv, 1997. "The Distribution of Pollution: Community Characteristics and Exposure to Air Toxics," Journal of Environmental Economics and Management, Elsevier, vol. 32(2), pages 233-250, February.
  6. Mario F. Teisl & Brian Roe & Alan S. Levy, 1999. "Ecocertification: Why It May Not Be a “Field of Dreams”," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 81(5), pages 1066-1071.
  7. Metcalf, Gilbert E., 1999. "A Distributional Analysis of Green Tax Reforms," National Tax Journal, National Tax Association, vol. 52(n. 4), pages 655-82, December.
  8. Hamilton, Stephen F. & Sunding, David L. & Zilberman, David, 2003. "Public goods and the value of product quality regulations: the case of food safety," Journal of Public Economics, Elsevier, vol. 87(3-4), pages 799-817, March.
  9. West, Sarah E. & Williams, R.C.Roberton III, 2004. "Estimates from a consumer demand system: implications for the incidence of environmental taxes," Journal of Environmental Economics and Management, Elsevier, vol. 47(3), pages 535-558, May.
  10. West, Sarah E., 2004. "Distributional effects of alternative vehicle pollution control policies," Journal of Public Economics, Elsevier, vol. 88(3-4), pages 735-757, March.
  11. 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.
  12. Annegrete Bruvoll & Karine Nyborg, 2004. "The Cold Shiver of Not Giving Enough: On the Social Cost of Recycling Campaigns," Land Economics, University of Wisconsin Press, vol. 80(4).
  13. McAusland, Carol, 2003. "Voting for pollution policy: the importance of income inequality and openness to trade," Journal of International Economics, Elsevier, vol. 61(2), pages 425-451, December.
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