This paper studies how the signaling of the credence attributes of consumer goods distorts their market equilibrium in developing countries. Costs of certification, sunk in order to achieve credibility, play a keyrole in producing an oligopolistic market, leading to high prices that form a barrier for consumers in the South. To lower the cost, certification is better achieved by a single independent body which can be financed either by end consumers, through a fee, or by public subsidies. The paper identifies the conditions under which each funding mechanism is most efficient, taking into account the government's budget constraint. The theoretical analysis is motivated with reference to agricultural seed certification.
from the same collectionResearch documentpublished in February 2020Research documentpublished in February 2020Research documentpublished in January 2020Research documentA single indicator of strong sustainability for development: Theoretical basis and practical implementationpublished in January 2020Research documentCommitted emissions and the risk of stranded assets from power plants in Latin America and the Caribbeanpublished in October 2019Research documentThe economic trigger: Enabling gendered social inclusion processes and outcomes amidst poverty escapes in Niger and Malawipublished in October 2019