Eco-Labeling and Stages of Development

authored by

Amab K. Basu, Nancy H. Chau, Ulrike Grote

Abstract

The paper examines the effectiveness of eco-labeling in providing a market-based solution to the underconsumption 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 econom ic growth, it is shown that an inverted-U relationship exists between consumer spending on ecounfriendly 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-oftrade gains.

External Organisation(s)

College of William and Mary
Cornell University
University of Bonn

Type

Contribution to book/anthology

Pages

471-490

No. of pages

20

Publication date

01.01.2017

Publication status

Published

Peer reviewed

Yes

ASJC Scopus subject areas

General Social Sciences, General Environmental Science

Sustainable Development Goals

SDG 8 - Decent Work and Economic Growth, SDG 13 - Climate Action

Electronic version(s)

https://doi.org/10.4324/9781351154529-38 (Access: Closed)