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Eco-label Adoption in an Interdependent World

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Abstract

The growing popularity of national efforts to promote eco-labeling raises important questions. In particular, developing countries fear that the eco-label can deliberately impose the environmental concern of (high income) importing countries on their production methods. Yet, empirical studies of the adoption of eco-labelling schemes at the cross-country level are scarce due to the lack of data availability. In this paper, the decision to introduce an eco-label is analyzed through a heteroskedastic Bayesian spatial probit, which allows the government’s decision to introduce an eco-label to be influenced by the behaviour of the neighbouring countries. The estimation is performed by extending the joint updating approach proposed by Holmes & Held (2006) to a spatial framework. Empirical evidence highlights the importance of a high stage of development, innovation experience and potential scale effects in the implementation of an eco-label scheme. In addition, results confirm the existence of a strategic interdependence in the eco-label decision.

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Bibliographic Info

Paper provided by IRENE Institute of Economic Research in its series IRENE Working Papers with number 10-01.

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Length: 43 pages
Date of creation: Jan 2010
Date of revision:
Handle: RePEc:irn:wpaper:10-01

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Keywords: Bayesian Spatial Probit; International Trade; Environmental Policy; Eco-labelling;

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