'Fair Trade' Coffee and the Mitigation of Local Oligopsony Power
AbstractIn recent years there has been considerable growth in ‘Fair Trade’ markets for several commodities, but most notably for coffee. We argue that coffee is grown under conditions that might well subject growers to the market power of intermediaries. Using an approach designed to evaluate the impact of state trading enterprises, we develop an oligopsony model of intermediaries. In this model, ‘Fair Trade’ firms optimize a welfare function that includes the producer surplus of growers. This concern for growers’ welfare among some intermediary firms helps to alleviate the market power distortion. We calibrate the model to price data reported by a fair trade organization, and consider the counterfactual removal of fair trade behavior by intermediaries and customers downstream. As expected, the income of coffee growers (in aggregate) is reduced, though the effects are quite small.
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 The University of Melbourne in its series Department of Economics - Working Papers Series with number 1057.
Length: 37 pages
Date of creation: 2008
Date of revision:
Contact details of provider:
Postal: Department of Economics, The University of Melbourne, 5th Floor, Economics and Commerce Building, Victoria, 3010, Australia
Phone: +61 3 8344 5289
Fax: +61 3 8344 6899
Web page: http://www.economics.unimelb.edu.au
More information through EDIRC
coffee; fair trade; oligopsony;
Find related papers by JEL classification:
- F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
- F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
- F14 - International Economics - - Trade - - - Empirical Studies of Trade
- L21 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Business Objectives of the Firm
This paper has been announced in the following NEP Reports:
- NEP-ALL-2009-02-14 (All new papers)
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.:
- Steve McCorriston & Donald MacLaren, 2007. "Deregulation as (Welfare Reducing) Trade Reform: the Case of the Australian Wheat Board," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 89(3), pages 637-650.
- Lopez, Rigoberto A. & You, Zhikang, 1993. "Determinants of oligopsony power : The Haitian coffee case," Journal of Development Economics, Elsevier, vol. 41(2), pages 275-284, August.
- Pierre Kohler, 2006. "The Economics of Fair Trade: For Whose Benefit? An Investigation into the Limits of Fair Trade as a Development Tool and the Risk of Clean-Washing," IHEID Working Papers 06-2007, Economics Section, The Graduate Institute of International Studies, revised Oct 2006.
- Sexton, Richard J. & Lavoie, Nathalie, 2001. "Food processing and distribution: An industrial organization approach," Handbook of Agricultural Economics, in: B. L. Gardner & G. C. Rausser (ed.), Handbook of Agricultural Economics, edition 1, volume 1, chapter 15, pages 863-932 Elsevier.
- Fabrizio Adriani & Leonardo Becchetti, 2004. "Fair Trade: A 'Third Generation' Welfare Mechanism to Make Globalisation Sustainable," CEIS Research Paper 62, Tor Vergata University, CEIS.
- 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.
- Mujawamariya, Gaudiose & Burger, Kees & D'Haese, Marijke F.C., 2012. "Behaviour and performance of traders in the gum arabic supply chain in Senegal: Investigating oligopsonistic myths," 2012 Conference, August 18-24, 2012, Foz do Iguacu, Brazil 126236, International Association of Agricultural Economists.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Marisa Cerantola).
If references are entirely missing, you can add them using this form.