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 program 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.