On the efficiency of fair trade
AbstractThis paper uses competitive equilibrium theory to analyze the economic efficiency of international “fair trade” between ethical consumers and low-income producers. The main analytical innovations are the reconsideration of the labor supply decision in a state of Keynesian involuntary unemployment as a choice between work and, not leisure, but inferior production activities; and the application of Pigou and Robinson's theory of employer monopsony, leading to a focus on the “local fair trade organization”, which has a similar effect to a labor union or minimum wage in eliminating monopsony rents. A price premium is found neither necessary nor sufficient for fair trade, and in a state of involuntary unemployment a premium does not lead to inefficient allocation. The conclusion is that fair trade improves welfare by strengthening competition for labor, and should be encouraged as a complementary element of an enlightened trade liberalization policy.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoArticle provided by Taylor & Francis Journals in its journal Review of Social Economy.
Volume (Year): 64 (2006)
Issue (Month): 4 ()
Contact details of provider:
Web page: http://www.tandfonline.com/RRSE20
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Dutt, Amitava Krishna, 1987. "Keynes with a Perfectly Competitive Goods Market," Australian Economic Papers, Wiley Blackwell, vol. 26(49), pages 275-93, December.
- Geoff Moore & Richard Slack & Jane Gibbon, 2009. "Criteria for Responsible Business Practice in SMEs: An Exploratory Case of U.K. Fair Trade Organisations," Journal of Business Ethics, Springer, vol. 89(2), pages 173-188, October.
- David Reinstein & Joon Song, 2012.
"Efficient Consumer Altruism and Fair Trade Products,"
Journal of Economics & Management Strategy,
Wiley Blackwell, vol. 21(1), pages 213-241, 03.
- Iain Davies & Lynette Ryals, 2010. "The Role of Social Capital in the Success of Fair Trade," Journal of Business Ethics, Springer, vol. 96(2), pages 317-338, October.
- Martin Richardson & Frank Staehler, 2007.
0709, University of Otago, Department of Economics, revised Jul 2007.
- Julie Steinkopf Rice, 2010. "Free trade, fair trade and gender inequality in less developed countries," Sustainable Development, John Wiley & Sons, Ltd., vol. 18(1), pages 42-50.
- Fort, Ricardo & Ruben, Ruerd, 2009. "The impact of Fair Trade on banana producers in northern Peru," 2009 Conference, August 16-22, 2009, Beijing, China 50964, International Association of Agricultural Economists.
- Leonardo Becchetti & Benjamin Huybrechts, 2008. "The Dynamics of Fair Trade as a Mixed-form Market," Journal of Business Ethics, Springer, vol. 81(4), pages 733-750, September.
- Kadow, Alexander, 2011.
"The Fair Trade movement: an economic perspective,"
SIRE Discussion Papers
2011-10, Scottish Institute for Research in Economics (SIRE).
- Alex Nicholls, 2010. "Fair Trade: Towards an Economics of Virtue," Journal of Business Ethics, Springer, vol. 92(2), pages 241-255, April.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Michael McNulty).
If references are entirely missing, you can add them using this form.