Households’ Willingness to Pay for Environmental Practices: An Implication of Eco-Labeling for Leather Products in Ethiopia
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Date
2007-01
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Addis Ababa University
Abstract
Eco-labels are becoming important market based instruments to influence the behavior of
consumers and industry in favor of environmentally-friendly products. This study examined
households’ willingness to pay (WTP) a premium for environmental attributes of leather
products in a hypothetical market. An eco-labeling scheme is used to differentiate leather
products.
Data was collected using two-stage sampling. First purposive sampling is
used to select two kebeles based on their relative distance from the pollution
source and polluted river. Next 300 households are selected using
systematic random sampling.
Descriptive statistics and an ordered probit model are used to analyse the
data set. The result revealed that the majority of the households agreed that
environmental pollution caused by conventional leather processing is a
problem to the livelihood of the people. Besides, almost all respondents
acknowledged the importance of the shift of production techniques from
conventional to environmentally friendly production techniques. With regard
to eco-labeling scheme, almost all respondents supported the programme.
About 75% of the respondents are willing to pay a premium for
environmental practices. The results suggest that monthly income, family
size and location significantly affect willingness to pay.
Finally, the findings in this study showed that there is a market for ecolabeled
leather products. Therefore eco-labeling could be used as an
important market instrument to complement mandatory laws and regulation
for environmental protection.
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Eco-labels are becoming important market based