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Despite the merits of eco-labeling as a consumer information and market-basedenvironmental policy alternative, the promise that green consumerism holds in encouragingenvironmentally conscious production decisions also raises concerns over whether eco-labelingdeters the market access of developing countries in high income countries, and e®ectively servesthe role of a non-tari® barrier to trade. In this paper, we disentangle the role of eco-labeling inworld trade, and show that (i) imperfectly informed consumption decision making in the absenceof labeling has a pro-trade bias; (ii) eco-labeling can guide green consumption and productiondecisions to reach the e±ciency frontier, provided that (iii) the choice of eco-labeling standardsin the two countries are not subject to coordination failure. Taking labeling standards asendogenously determined by market share rivalry between the two countries, we show thatstrategic use of eco-labeling gives rise to opposing incentives, and results in a \tari®-likeoutcome that further reduces the volume of trade. Speci¯cally, net importers deviate from thee±ciency frontier by choosing labeling standards that are too high, while net exporters chooselabeling standards that are too low.

Keywords: Eco-Labeling ; Market Access ; Strategic Environmental Standards.

Subject(s): Marketing

Issue Date: 2001-08

Publication Type: Working or Discussion Paper

PURL Identifier: http://purl.umn.edu/127662

Total Pages: 37

JEL Codes: F13; L15; Q28

Series Statement: WP

2001-15

Record appears in: Cornell University > Department of Applied Economics and Management > Working Papers





Autor: Basu, Arnab K. ; Chau, Nancy H.

Fuente: http://ageconsearch.umn.edu/record/127662?ln=en



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