Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/18497
Authors: 
Althammer, Wilhelm
Dröge, Susanne
Year of Publication: 
2006
Series/Report no.: 
DIW Discussion Papers 604
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.
Subjects: 
Ecological Labels
Product Differentiation
North-South Trade
WTO Rules
JEL: 
L13
Q56
F13
F18
Document Type: 
Working Paper

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