Eco‐Labeling and Stages of Development

Arnab Basu, Nancy Chau and Ulrike Grote

Review of Development Economics, 2003, vol. 7, issue 2, 228-247

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.

Date: 2003
References: Add references at CitEc
Citations: View citations in EconPapers (12)

Downloads: (external link)
https://doi.org/10.1111/1467-9361.00188

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bla:rdevec:v:7:y:2003:i:2:p:228-247

Ordering information: This journal article can be ordered from
http://www.blackwell ... bs.asp?ref=1363-6669

Access Statistics for this article

Review of Development Economics is currently edited by E. Kwan Choi

More articles in Review of Development Economics from Wiley Blackwell
Bibliographic data for series maintained by Wiley Content Delivery ().