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Market Segmentation by Certification: Quantity effects on tropical timber production

Author

Listed:
  • Matthew T. Cole

    (Department of Economics, California Polytechnic State University)

  • Jacqueline Doremus

    (Department of Economics, California Polytechnic State University)

  • Stephen Hamilton

    (Department of Economics, California Polytechnic State University)

Abstract

Eco-certification standards are increasingly used by industrial countries to impose import restrictions on goods produced by foreign suppliers. Import restrictions on eco-certified goods that prevent the trade of goods derived from unsustainable practices serve to segment global markets served by foreign producers into a conventional market and a certified market, altering market structure and equilibrium prices in a manner that potentially works against sustainability goals. In this paper, we examine the effect of forest certification on tropical timber production in Central Africa. Using panel data of timber production in Cameroon from 2003 to 2009, we show that conventional timber producers substantially increase harvest rates in response to eco-certification standards, and that this effect is strongest in less competitive timber markets. Moreover, we find eco-certification shifts production to forests with higher extraction costs and potentially higher marginal damages from timber extraction, exacerbating economic inefficiency.

Suggested Citation

  • Matthew T. Cole & Jacqueline Doremus & Stephen Hamilton, 2019. "Market Segmentation by Certification: Quantity effects on tropical timber production," Working Papers 1902, California Polytechnic State University, Department of Economics.
  • Handle: RePEc:cpl:wpaper:1902
    as

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    File URL: https://www.cob.calpoly.edu/economics/wp-content/uploads/sites/27/2019/11/paper1902.pdf
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    References listed on IDEAS

    as
    1. Brusselaers, Jan & Van Huylenbroeck, Guido & Buysse, Jeroen, 2017. "Green Public Procurement of Certified Wood: Spatial Leverage Effect and Welfare Implications," Ecological Economics, Elsevier, vol. 135(C), pages 91-102.
    2. Jason Walter & Yang-Ming Chang, 2017. "Green certification, heterogeneous producers, and green consumers: a welfare analysis of environmental regulations," Journal of Regulatory Economics, Springer, vol. 52(3), pages 333-361, December.
    3. Blackman, Allen & Lahiri, Bidisha & Pizer, William & Rivera Planter, Marisol & Muñoz Piña, Carlos, 2010. "Voluntary environmental regulation in developing countries: Mexico's Clean Industry Program," Journal of Environmental Economics and Management, Elsevier, vol. 60(3), pages 182-192, November.
    4. Gamper-Rabindran, Shanti, 2006. "Did the EPA's voluntary industrial toxics program reduce emissions? A GIS analysis of distributional impacts and by-media analysis of substitution," Journal of Environmental Economics and Management, Elsevier, vol. 52(1), pages 391-410, July.
    5. Li, Yuanhao & van 't Veld, Klaas, 2015. "Green, greener, greenest: Eco-label gradation and competition," Journal of Environmental Economics and Management, Elsevier, vol. 72(C), pages 164-176.
    6. Zago, Angelo M. & Pick, Daniel H., 2004. "Labeling Policies in Food Markets: Private Incentives, Public Intervention, and Welfare Effects," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 29(1), pages 1-16, April.
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    More about this item

    Keywords

    forestry; trade; product differentiation; eco-label;
    All these keywords.

    JEL classification:

    • Q23 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Forestry
    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products
    • L31 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Nonprofit Institutions; NGOs; Social Entrepreneurship

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