Despite the national promotion of food safety measures, a substantial urban–rural gap remains in the demand for food safety in China. To explain this gap, we explore the role of knowledge of food safety labels. We measure demand using the marginal willingness to pay (MWTP) for the green food label and the organic food label for rice and pork in urban and rural areas. We employ discrete choice experiments and the control function approach to control for potential endogeneity problems. The results show that the MWTP for the labels is significantly positive among people with label knowledge but insignificant or even negative among people without label knowledge, and the urban–rural gap in the MWTP is larger among the former than among the latter. These knowledge-related differences explain 8–29% of the urban–rural gap in the MWTP for the green food label. Our findings imply that improving knowledge about the green food label could potentially be effective in reducing the urban–rural gap, while our results also imply the existence of a future challenge for the government in promoting label knowledge more effectively in rural China.
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