The Fair Trade movement: an economic perspective
AbstractFair Trade (FT) products such as coffee and textiles are becoming increasingly popular with altruistic consumers all over the world. This paper seeks to understand the economic effects of this grassroots movement which directly links ethically-minded consumers in industrialised countries with marginalised producers in developing economies. We extend the Ricardian trade model and introduce a FT sector in developing South that offers a fair wage – the FT premium. There are indeed positive welfare effects from FT but those come at the expense of rising inequalities within South which are in turn a rational by-product of FT. The degree of inequalities depends on the specifics of the cooperative structures in the FT sector. Given the rigidities and inequalities FT introduces and rests upon, this form of alternative trade appears to be only sustainable as niche movement.
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Bibliographic InfoPaper provided by Scottish Institute for Research in Economics (SIRE) in its series SIRE Discussion Papers with number 2011-10.
Date of creation: 2011
Date of revision:
Fair Trade; comparative advantage; wage premium; inequalities; ethical consumerism; cooperative;
Other versions of this item:
- F11 - International Economics - - Trade - - - Neoclassical Models of Trade
- O11 - Economic Development, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
- Q13 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Markets and Marketing; Cooperatives; Agribusiness
This paper has been announced in the following NEP Reports:
- NEP-AGR-2012-06-05 (Agricultural Economics)
- NEP-ALL-2012-06-05 (All new papers)
- NEP-HME-2012-06-05 (Heterodox Microeconomics)
- NEP-INT-2012-06-05 (International Trade)
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