Eco-labels, Production Related Externalities and Trade
We analyze the trade and welfare effects of eco-labels in a domestic market with one domestic firm and one foreign firm. Pollution is production related, and the government can choose between including the product category in an eco-label scheme and setting an environmental standard. The environmental standard will only apply to the domestic firm, while both firms can adopt the eco-label. Given that the environmental damage is not too large, we find that it is optimal for the government to introduce an eco-label scheme. An eco-label scheme is optimal even though the domestic firm may loose profit and the foreign firm may gain. Hence, the eco-label scheme is not introduced for protectionist purposes. Further, if the government for some reason were prevented from using eco-labels, global, domestic and foreign welfare would be hampered.
In order to set up a list of libraries that you have access to,
you must first login
or sign up.
Then set up a personal list of libraries from your profile page by
clicking on your user name at the top right of any screen.