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The demand for socially responsible products: empirical evidence from a pilot study on fair trade consumers

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  • Leonardo Becchetti

    ()
    (Economics Department, University of Rome “Tor Vergata”)

  • Furio Camillo Rosati

    (Economics Department, University of Rome “Tor Vergata”)

Abstract

We analyze behaviour and motivations of a sample of about one thousand consumers purchasing “fair trade (FT) goods”, i. e. food and artisan goods which include socially responsible (SR) characteristics and a price premium for primary product producers with respect to equivalent non SR products. By estimating a simultaneous two-equation treatment regression model we find that FT products have less than unit income elasticity and their demand is negatively (positively) correlated with geographical distance from the nearest shop (age and awareness of SR criteria). Awareness of SR criteria depends, in turn, on a series of factors (consumption habits, membership of volunteer associations) which, indirectly (via increased awareness), significantly affect consumption. We also measure consumers’ willingness to pay in excess for the SR features of FT products with a contingent evaluation approach and find that it is positively correlated with awareness of SR criteria.

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File URL: http://www.ecineq.org/milano/WP/ECINEQ2005-04.pdf
File Function: First version, 2005
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Bibliographic Info

Paper provided by ECINEQ, Society for the Study of Economic Inequality in its series Working Papers with number 04.

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Length: 42 pages
Date of creation: Nov 2005
Date of revision:
Handle: RePEc:inq:inqwps:ecineq2005-04

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Keywords: fair trade; social preferences; willingness to pay;

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  1. Fehr, Ernst & Schmidt, Klaus M., 1999. "A theory of fairness, competition, and cooperation," Munich Reprints in Economics 20650, University of Munich, Department of Economics.
  2. Fehr, Ernst & Falk, Armin, 2002. "Psychological foundations of incentives," European Economic Review, Elsevier, vol. 46(4-5), pages 687-724, May.
  3. Steven Suranovic, 2002. "International Labour and Environmental Standards Agreements: Is This Fair Trade?," The World Economy, Wiley Blackwell, vol. 25(2), pages 231-245, 02.
  4. Anderson, S., 1986. "Spatial competition and price leadership," CORE Discussion Papers 1986002, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  5. P. De Pelsmacker & L. Driesen & G. Rayp, 2003. "Are fair trade labels good business ? Ethics and coffee buying intentions," Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium 03/165, Ghent University, Faculty of Economics and Business Administration.
  6. Peter A. Diamond & Jerry A. Hausman, 1994. "Contingent Valuation: Is Some Number Better than No Number?," Journal of Economic Perspectives, American Economic Association, vol. 8(4), pages 45-64, Fall.
  7. Katherine Terrell & Fatma El Hamidi, 2001. "The Impact of Minimum Wages on Wage Inequality and Employment in the Formal and Informal Sector in Costa Rica," William Davidson Institute Working Papers Series 479, William Davidson Institute at the University of Michigan.
  8. Fabrizio Adriani & Leonardo Becchetti, 2004. "Fair Trade: A 'Third Generation' Welfare Mechanism to Make Globalisation Sustainable," CEIS Research Paper 62, Tor Vergata University, CEIS.
  9. Maseland, Robbert & Vaal, Albert de, 2001. "How fair is fair trade?," Research Report 01C48, University of Groningen, Research Institute SOM (Systems, Organisations and Management).
  10. Basu, Kaushik & Van, Pham Hoang, 1998. "The Economics of Child Labor," American Economic Review, American Economic Association, vol. 88(3), pages 412-27, June.
  11. Campbell, Carl M, III & Kamlani, Kunal S, 1997. "The Reasons for Wage Rigidity: Evidence from a Survey of Firms," The Quarterly Journal of Economics, MIT Press, vol. 112(3), pages 759-89, August.
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