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Fair Trade

Author

Listed:
  • Martin Richardson
  • Frank Stähler

Abstract

This paper analyses a setting in which a vertically integrated fair-trade firm competes against vertically disintegrated, profit-maximising oligopolists. Consumers of the fair-trade product derive a ‘warm glow’ that depends on the wage paid to fair-trade producers; the firm returns all surplus to its farmers. Trade integration will unambiguously increase the size of the fair-trade firm, but the relative size compared to oligopolists may shrink. Furthermore, we show that the ‘warm glow’ effect may support a marginal expansion of the volume of fair trade, but for rather perverse reasons.

Suggested Citation

  • Martin Richardson & Frank Stähler, 2014. "Fair Trade," The Economic Record, The Economic Society of Australia, vol. 90(291), pages 447-461, December.
    • Handle: RePEc:bla:ecorec:v:90:y:2014:i:291:p:447-461
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    File URL: http://hdl.handle.net/10.1111/ecor.2014.90.issue-291
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    Citations

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    Cited by:

    1. Pio Baake & Helene Naegele, 2017. "Competition between For-Profit and Industry Labels: The Case of Social Labels in the Coffee Market," Discussion Papers of DIW Berlin 1686, DIW Berlin, German Institute for Economic Research.
    2. Ruben, Ruerd & Fort, Ricardo, 2012. "The Impact of Fair Trade Certification for Coffee Farmers in Peru," World Development, Elsevier, vol. 40(3), pages 570-582.
    3. Suphanit Piyapromdee & Russell Hillberry & Donald MacLaren, 2014. "‘Fair trade’ coffee and the mitigation of local oligopsony power," European Review of Agricultural Economics, Oxford University Press and the European Agricultural and Applied Economics Publications Foundation, vol. 41(4), pages 537-559.
    4. Ana C. Dammert & Sarah Mohan, 2015. "A Survey Of The Economics Of Fair Trade," Journal of Economic Surveys, Wiley Blackwell, vol. 29(5), pages 855-868, December.
    5. Kadow, Alexander, 2011. "The Fair Trade movement: an economic perspective," SIRE Discussion Papers 2011-10, Scottish Institute for Research in Economics (SIRE).
    6. John Ballingall & Niven Winchester, 2010. "Food Miles: Starving the Poor?," The World Economy, Wiley Blackwell, vol. 33(10), pages 1201-1217, October.

    More about this item

    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation

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