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The global diffusion of environmental clubs: how pressure from importing countries supports the chemical industry's Responsible Care Ò program

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Abstract

Environmental clubs have proliferated across sectors and issue areas. We examine the diffusion of the chemical industry’s Responsible Care® (RC) program. Much of the work on the diffusion of clubs has focused on the demand side: why firms join these clubs despite the costs of doing so. There is some work focusing on the supply side: why actors establish or create a new club. However, there is virtually no work examining why national-level industry associations decide to subscribe to an existing global environmental club in order to make it available to their members. Industry organizations in 17 lower and middle-income countries have joined RC, comprising 25 percent of RC members. We ask, in the context of developing countries, what motivates national associations to join RC? Drawing on an original dataset of RC global diffusion in 195 countries (1985–2017), we estimate a Cox proportional hazards model of the risk of joining RC. We find that RC adoption is more likely when a country exports chemicals to other countries that have joined RC (the California effect) and is unaffected by the total volume of its chemical trade. Thus, while exposure to global markets per se may not influence RC adoption, incentives change considerably when countries’ key importers signal their support for these environmental practices. This is because importing firms often realize that because they have joined Responsible Care, NGOs and stakeholders expect them to demand that their overseas suppliers adopt the same sort of environmental policies and work place safety practices. In addition, peer pressure and learning matter: RC adoption is more likely when countries in close physical vicinity (e.g., within 500 miles) have joined the club. Finally, domestic factors play a role as well: both the level of democracy and the size of the economy encourage national associations to join RC.

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"Technology is not the answer to the population problem. Rather, what is needed is 'mutual coercion mutually agreed upon'--everyone voluntarily giving up the freedom to breed without limit. If we all have an equal right to many 'commons' provided by nature and by the activities of modern governments, then by breeding freely we behave as do herders sharing a common pasture. Each herder acts rationally by adding yet one more beast to his/her herd, because each gains all the profit from that addition, while bearing only a fraction of its costs in overgrazing, which are shared by all the users. The logic of the system compels all herders to increase their herds without limit, with the 'tragic,' i.e. 'inevitable,' 'inescapable' result: ruin the commons. Appealing to individual conscience to exercise restraint in the use of social-welfare or natural commons is likewise self-defeating: the conscientious will restrict use (reproduction), the heedless will continue using (reproducing), and gradually but inevitably the selfish will out-compete the responsible. Temperance can be best accomplished through administrative law, and a 'great challenge...is to invent the corrective feedbacks..to keep custodians honest.'"
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For a long while, economists, like specialists in other fields, often took it for granted that groups of individuals with common interests tended to act to further those common interests, much as individuals might be expected to further their own interests. If a group of rational and self-interested individuals realized that they would gain from political action of a particular kind, they could be expected to engage in such action; if a group of workers would gain from collective bargaining, they could be expected to organize a trade union; if a group of firms in an industry would profit by colluding to achieve a monopoly price, they would tend to do so; if the middle class or any other class in a country had the power to dominate, that class would strive to control the government and run the country in its own interest. The idea that there was some tendency for groups to act in their common interests was often merely taken for granted, but in some cases it played a central conceptual role, as in some early American theories of labour unions, in the ‘group theory’ of the ‘pluralists’ in political science, in J.K. Galbraith’s concept of ‘countervailing power’, and in the Marxian theory of class conflict.
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This chapter discusses job market signaling. The term market signaling is not exactly a part of the well-defined, technical vocabulary of the economist. The chapter presents a model in which signaling is implicitly defined and explains its usefulness. In most job markets, the employer is not sure of the productive capabilities of an individual at the time he hires him. The fact that it takes time to learn an individual's productive capabilities means that hiring is an investment decision. On the basis of previous experience in the market, the employer has conditional probability assessments over productive capacity with various combinations of signals and indices. This chapter presents an introduction to Spence's more extensive analysis of market signaling.
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Consumers evaluate product quality with information signals such as brand name giving an advantage to established firms over other firms even when introducing a new product. Another signal is 'country of origin' and, as high-income countries focus more heavily on higher quality goods, there is a tendency for consumers to associate quality with a country's income per capita. Thus new firms from developing countries face particular problems in export markets. International standardization offers a potential solution to their problem. However, analysis of the use of ISO 9000 suggests that it is difficult to eliminate the informational asymmetry. Copyright © 2003 John Wiley & Sons, Ltd.