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Ecolabeling, consumers' preferences and taxation

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  • 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.

Suggested Citation

  • Schumacher, Ingmar, 2010. "Ecolabeling, consumers' preferences and taxation," Ecological Economics, Elsevier, vol. 69(11), pages 2202-2212, September.
  • Handle: RePEc:eee:ecolec:v:69:y:2010:i:11:p:2202-2212
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    References listed on IDEAS

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    1. Schumacher, Ingmar, 2009. "The dynamics of environmentalism and the environment," Ecological Economics, Elsevier, vol. 68(11), pages 2842-2849, September.
    2. 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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    Cited by:

    1. Brécard, Dorothée, 2014. "Consumer confusion over the profusion of eco-labels: Lessons from a double differentiation model," Resource and Energy Economics, Elsevier, vol. 37(C), pages 64-84.
    2. Vlaeminck, Pieter & Jiang, Ting & Vranken, Liesbet, 2014. "Labelling and consumer behaviour: experimental evidence from a Belgian supermarket," 2014 International Congress, August 26-29, 2014, Ljubljana, Slovenia 182742, European Association of Agricultural Economists.
    3. Vlaeminck, Pieter & Vranken, Liesbet, 2015. "Do labels capture consumers’ actual willingness to pay for Fair Trade characteristics?," Working Papers 206438, Katholieke Universiteit Leuven, Centre for Agricultural and Food Economics.
    4. 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.
    5. Grebitus, Carola & Steiner, Bodo & Veeman, Michele M., 2016. "Paying for sustainability: A cross-cultural analysis of consumers’ valuations of food and non-food products labeled for carbon and water footprints," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 63(C), pages 50-58.
    6. 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.
    7. Alessia Cavaliere & Elena Claire Ricci & Matteo Solesin & Alessandro Banterle, 2014. "Can Health and Environmental Concerns Meet in Food Choices?," Sustainability, MDPI, Open Access Journal, vol. 6(12), pages 1-16, December.
    8. Vlaeminck, Pieter & Jiang, Ting & Vranken, Liesbet, 2014. "Food labeling and eco-friendly consumption: Experimental evidence from a Belgian supermarket," Ecological Economics, Elsevier, vol. 108(C), pages 180-190.
    9. Yenipazarli, Arda, 2015. "The economics of eco-labeling: Standards, costs and prices," International Journal of Production Economics, Elsevier, vol. 170(PA), pages 275-286.
    10. 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, Springer;Society for Environmental Economics and Policy Studies - SEEPS, vol. 16(1), pages 69-87, January.
    11. Peschel, Anne & Grebitus, Carola & Steiner, Bodo & Veeman, Michele, 2016. "How does consumer knowledge affect environmentally sustainable choices? Evidence from a cross-country latent class analysis of food labels," MPRA Paper 69864, University Library of Munich, Germany.
    12. Sladana Pavlinovic, 2013. "Signalling Green Technology Through Price And Eco-Label," Annals - Economy Series, Constantin Brancusi University, Faculty of Economics, vol. 6, pages 87-94, December.

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