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Eco‐Labeling and Stages of Development

Author

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  • Arnab K. Basu
  • Nancy H. Chau
  • Ulrike Grote

Abstract

The paper examines the effectiveness of eco‐labeling in providing a market‐based solution to the under‐consumption of eco‐friendly products in developing and developed countries. The authors show that whether labeling is an effective device in solving the problem of asymmetric information between sellers and buyers, or whether false labeling severs the link between willingness to pay and environmental conscious production choices, depends crucially on how monitoring intensities respond endogenously to economic growth, openness to trade, and technology transfers. In particular, by accounting for endogenous policy responses to economic growth, it is shown that an inverted‐U relationship exists between consumer spending on eco‐unfriendly products and national income. In addition, while international trade unambiguously benefits the environment in the presence of eco‐labeling with perfect enforcement, trade openness may nevertheless delay the turning point of the growth and environment relationship, when the cost of enforcement falls disproportionately on developing countries, and when environmental policies are employed to reap terms‐of‐trade gains.

Suggested Citation

  • Arnab K. Basu & Nancy H. Chau & Ulrike Grote, 2003. "Eco‐Labeling and Stages of Development," Review of Development Economics, Wiley Blackwell, vol. 7(2), pages 228-247, May.
    • Handle: RePEc:bla:rdevec:v:7:y:2003:i:2:p:228-247
    DOI: 10.1111/1467-9361.00188
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    Citations

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    Cited by:

    1. Gerhard Clemenz, 2010. "Eco-Labeling and Horizontal Product Differentiation," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 45(4), pages 481-497, April.
    2. Junyi Shen, 2008. "Understanding the determinants of consumers f willingness to pay for eco-labeled products: An empirical analysis of the China Environmental Label," OSIPP Discussion Paper 08E001, Osaka School of International Public Policy, Osaka University.
    3. Beuchelt, Tina D. & Zeller, Manfred, 2011. "Profits and poverty: Certification's troubled link for Nicaragua's organic and fairtrade coffee producers," Ecological Economics, Elsevier, vol. 70(7), pages 1316-1324, May.
    4. Basu, Arnab K. & Chau, Nancy H. & Grote, Ulrike, 2004. "On export rivalry and the greening of agriculture--the role of eco-labels," Agricultural Economics, Blackwell, vol. 31(2-3), pages 135-147, December.
    5. Basu, Arnab K. & Hicks, Robert L., 2008. "Label Performance and the Willingness to Pay for Fair Trade Coffee: A Cross-National Perspective," Discussion Papers 44336, University of Bonn, Center for Development Research (ZEF).
    6. Elizabeth Waithanji & Nadhem Mtimet & Pauline Muindi, 2019. "Contagious Bovine Pleuropneumonia Vaccine Delivery and Adoption by Women and Men in North-Eastern Kenya," The European Journal of Development Research, Palgrave Macmillan;European Association of Development Research and Training Institutes (EADI), vol. 31(3), pages 364-387, July.
    7. Steiner, Bodo E., 2002. "The Valuation Of Labelling Attributes In A Wine Market," 2002 Annual meeting, July 28-31, Long Beach, CA 19718, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    8. Krishna, Vijesh V. & Pascual, Unai & Zilberman, David, 2009. "Channeling consumption preferences for co-existence of landrace and modern varieties in-situ," 2009 Conference, August 16-22, 2009, Beijing, China 51748, International Association of Agricultural Economists.
    9. Ivanova, Daniela, 2018. "Сертификацията – Инструмент За „Зелени“ Комуникации В Глобалната Търговия [Certification - a tool for “green” communications in global trade]," MPRA Paper 96038, University Library of Munich, Germany.
    10. Aguilar, Francisco X. & Cai, Zhen, 2010. "Conjoint effect of environmental labeling, disclosure of forest of origin and price on consumer preferences for wood products in the US and UK," Ecological Economics, Elsevier, vol. 70(2), pages 308-316, December.
    11. Bodo E. Steiner, 2004. "Australian wines in the British wine market: A hedonic price analysis," Agribusiness, John Wiley & Sons, Ltd., vol. 20(3), pages 287-307.
    12. Grote, Ulrike, 2009. "Environmental Labeling, Protected Geographical Indications and the Interests of Developing Countries," Estey Centre Journal of International Law and Trade Policy, Estey Centre for Law and Economics in International Trade, vol. 10(1), pages 1-17.

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