Households’ Willingness to Pay for Environmental Practices: An Implication of Eco-Labeling for Leather Products in Ethiopia

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Addis Ababa University


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.



Eco-labels are becoming important market based