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.
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 InfoPaper provided by Business School - Economics, University of Glasgow in its series Working Papers with number 2011_05.
Date of creation: Feb 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-2011-04-09 (Agricultural Economics)
- NEP-ALL-2011-04-09 (All new papers)
- NEP-HME-2011-04-09 (Heterodox Microeconomics)
- NEP-INT-2011-04-09 (International Trade)
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.:
- 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.
- Becchetti, Leonardo & Costantino, Marco, 2008. "The Effects of Fair Trade on Affiliated Producers: An Impact Analysis on Kenyan Farmers," World Development, Elsevier, vol. 36(5), pages 823-842, May.
- Philip Booth & Linda Whetstone, 2007. "Half A Cheer For Fair Trade," Economic Affairs, Wiley Blackwell, vol. 27(2), pages 29-36, 06.
- Maseland, Robbert & Vaal, Albert de, 2001. "How fair is fair trade?," Research Report 01C48, University of Groningen, Research Institute SOM (Systems, Organisations and Management).
- Solow, Robert M., 1979. "Another possible source of wage stickiness," Journal of Macroeconomics, Elsevier, vol. 1(1), pages 79-82.
- Leonardo Becchetti & Furio Rosati, 2007.
"Global social preferences and the demand for socially responsible products: empirical evidence from a pilot study on fair trade consumers,"
CEIS Research Paper
90, Tor Vergata University, CEIS.
- Leonardo Becchetti & Furio Camillo Rosati, 2007. "Global Social Preferences and the Demand for Socially Responsible Products: Empirical Evidence from a Pilot Study on Fair Trade Consumers," The World Economy, Wiley Blackwell, vol. 30(5), pages 807-836, 05.
- Ernst Fehr & Klaus M. Schmidt, 1999.
"A Theory Of Fairness, Competition, And Cooperation,"
The Quarterly Journal of Economics,
MIT Press, vol. 114(3), pages 817-868, August.
- Fehr, Ernst & Schmidt, Klaus M., . "A theory of fairness, competition, and cooperation," Chapters in Economics, University of Munich, Department of Economics.
- Fehr, Ernst & Schmidt, Klaus M., 1998. "A Theory of Fairness, Competition and Cooperation," CEPR Discussion Papers 1812, C.E.P.R. Discussion Papers.
- Ernst Fehr & Klaus M. Schmidt, . "A Theory of Fairness, Competition and Cooperation," IEW - Working Papers 004, Institute for Empirical Research in Economics - University of Zurich.
- Fehr, Ernst & Schmidt, Klaus M., 1999. "A theory of fairness, competition, and cooperation," Munich Reprints in Economics 20650, University of Munich, Department of Economics.
- Leonardo Becchetti & Stefano Castriota, 2008.
"Is Fair Trade Honey Sweeter? An empirical analysis on the effect of affiliation on productivity,"
104, ECINEQ, Society for the Study of Economic Inequality.
- Leonardo Becchetti & Stefano Castriota, 2009. "Is Fair Trade Honey Sweeter? An Empirical Analysis on the Effect of Affiliation on Productivity," CEIS Research Paper 141, Tor Vergata University, CEIS, revised 30 Jun 2009.
- repec:feb:natura:0061 is not listed on IDEAS
- Eriksson, Clas, 2004. "Can green consumerism replace environmental regulation?--a differentiated-products example," Resource and Energy Economics, Elsevier, vol. 26(3), pages 281-293, September.
- Mark Hayes, 2006. "On the efficiency of fair trade," Review of Social Economy, Taylor & Francis Journals, vol. 64(4), pages 447-468.
- Poret Sylvaine & Chambolle Claire, 2007. "Fair Trade Labeling: Inside or Outside Supermarkets?," Journal of Agricultural & Food Industrial Organization, De Gruyter, vol. 5(1), pages 1-24, November.
- Fabrizio Adriani & Leonardo Becchetti, 2004. "Fair Trade: A 'Third Generation' Welfare Mechanism to Make Globalisation Sustainable," CEIS Research Paper 62, Tor Vergata University, CEIS.
- Kreickemeier, Udo & Nelson, Douglas, 2006. "Fair wages, unemployment and technological change in a global economy," Journal of International Economics, Elsevier, vol. 70(2), pages 451-469, December.
- LeClair, Mark S., 2002. "Fighting the Tide: Alternative Trade Organizations in the Era of Global Free Trade," World Development, Elsevier, vol. 30(6), pages 949-958, June.
- 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.
- C Arnot & P Boxall & S Cash, 2006.
"Do ethical consumers care about price? A revealed preference analysis of fair trade coffee purchases,"
Natural Field Experiments
00221, The Field Experiments Website.
- Chris Arnot & Peter C. Boxall & Sean B. Cash, 2006. "Do Ethical Consumers Care About Price? A Revealed Preference Analysis of Fair Trade Coffee Purchases," Canadian Journal of Agricultural Economics/Revue canadienne d'agroeconomie, Canadian Agricultural Economics Society/Societe canadienne d'agroeconomie, vol. 54(4), pages 555-565, December.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Jeanette Findlay).
If references are entirely missing, you can add them using this form.