Are eco-labels good for the local economy?

We evaluate whether the adoption of a well-known transition management instrument in the tourism industry can support simultaneously economic growth as well as sustainability. We create a detailed dataset at the municipality level and use a recently developed policy evaluation technique to investigate the causal impact of the Blue Flag programme on the local economies. Estimates show that this eco-label is not effective at enhancing the local economy; findings are homogeneous across destinations. This empirical result is in line with the recent theoretical literature arguing that a single policy does not suffice for transiting towards a sustainable economy.