Ecological Labelling in North-South Trade

Wilhelm Althammer () and Susanne Dröge

No 604, Discussion Papers of DIW Berlin from DIW Berlin, German Institute for Economic Research

Abstract: We investigate in a horizontal product differentiation model with North-South trade the implications of a home bias in consumers' demand for labelled goods. We compare mutual recognition and international harmonisation of ecological labels with respect to firms' profits and welfare. Northern consumers perceive a warm glow from buying green, but have information problems with imported labelled products. Firms differ in labelling costs which could help a Southern firm to compensate for the home bias under mutual recognition. Under harmonisation the home bias disappears. Welfare analysis of harmonised labelling shows that a Southern firm gains from adopting a harmonised label - even if there is "eco-imperialism". Given the specific trade structure in our model, harmonisation is a beneficial regime except for the case that labelling costs reach a specific treshold.

Keywords: Ecological Labels; Product Differentiation; North-South Trade; WTO Rules (search for similar items in EconPapers)
JEL-codes: F13 F18 L13 Q56 (search for similar items in EconPapers)
Pages: 32 p.
Date: 2006
New Economics Papers: this item is included in nep-agr, nep-com, nep-env, nep-int, nep-mkt and nep-sea
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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