Panel Paper: Noisy Ecolabels and the Provision of Public Goods

Saturday, November 10, 2018
Coolidge - Mezz Level (Marriott Wardman Park)

*Names in bold indicate Presenter

Anna Benkeser1, Daniel Matisoff1, Douglas Noonan2 and Mallory Flowers3, (1)Georgia Institute of Technology, (2)Indiana University Purdue University Indianapolis, (3)Rotterdam School of Management, Erasmus University

What product improvements do green labels promote? This paper explores the multifaceted environmental impacts required by eco-certifications across agricultural commodities. When designed effectively, these environmental outcomes improve livelihoods of local communities around the world, often in developing countries. Past work suggests institutional design explains differences in terms of consumer perception, market premiums, or narrowly-defined emissions outcomes. We build on this, offering a framework that understands the noisiness of eco-label design in terms of the numerous types of environmental benefits generated by certified commodities. Our framework identifies how governance processes such as sponsorship and stakeholder engagement influence key dimensions of ecolabel design. These dimensions—stringency, and public good provision—vary across labels, creating a noisy market for green commodities. We deploy the framework to describe a sample of 51 agricultural ecolabels, indexing stringency as the number and criticality of label requirements, and approximating the total range of public goods provided when products meet those requirements. Statistical analysis reveals that governance processes impact label design, offering explanations for much of the noise in ecolabel outcomes. Statistical results show significant effects of governance on both stringency and public good requirements. Our results also affirm past suggestions that industry-sponsored labels have less stringent requirements and provide fewer public benefits. We conclude with a discussion of a research agenda that will allow us to understand the design, uptake, and impact of ecolabels.