Rising interest in credence qualities in agricultural products and the role for government
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Consumers are increasingly interested in the impacts of agricultural
production on the environment, animals, workers, health etc – all
examples of credence attributes. While governments set and enforce
minimum requirements regarding these attributes, roles for government in
markets for products with additional levels of these attributes
(‘ecolabelled’ products) are less clearly defined and understood. This
presents a risk that government actions will create distortions in markets
for ecolabelled and non-ecolabelled products. This is especially likely if
policy is based on pursuing environmental and other outcomes through
encouraging ecolabelling. There are some areas, it is argued, where
government actions could increase the efficiency of markets for goods
with additional credence qualities. This is because of the impacts of
information asymmetries between producers and consumers. However,
firms have developed many ways to signal the credibility of their claims,
and any government intervention must be cognisant of this. The paper
reports on a continuing body of work within the Victorian Department of
Primary Industries aimed at identifying roles for government in
ecolabelling, and progressing their implementation.