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 aninternational trading system. A general equilibrium model, calibrated to 1998 data,describes United States and European Union labelling regimes for geneticallymodified agricultural products. The results indicate that the labelling choice of tradepartners have large distributive impacts within national economies, as well as acrosscountries and highlight the importance of using general equilibrium framework tounderstand the system wide impacts of labelling policies that differentiate productsbased upon quality characteristics. These results are essential for policy makersseeking to understand the global and domestic economic implications ofenvironmental labelling systems.