Who Benefits from Quality Labelling? Segregation Costs, International Trade and Producer Outcomes

This paper analyses the impact of quality based labelling on product prices, factor allocation and the resulting effects on producers within the context of an international trading system. A general equilibrium model, calibrated to 1998 data, describes United States and European Union labelling regimes for genetically modified agricultural products. The results indicate that the labelling choice of trade partners have large distributive impacts within national economies, as well as across countries and highlight the importance of using general equilibrium framework to understand the system wide impacts of labelling policies that differentiate products based upon quality characteristics. These results are essential for policy makers seeking to understand the global and domestic economic implications of environmental labelling systems.