Sustainable agricultural production, income, and eco‐labeling: What can be learned from a modern Ricardian approach?

Abstract In this article, trade‐in sustainably produced agricultural products with eco‐labeling are modeled using a modern Ricardian framework. Based on this approach, expressions are derived for the share of products importers purchase from specific exporters for low‐cost unsustainable and high‐cost sustainable production technologies, assuming consumers have non‐homothetic preferences. The consumer and sustainability gains from eco‐labeling are also analyzed, along with a discussion and comparison of the effects of mutual recognition versus harmonization of countries' eco‐labeling regimes.