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The Fair Trade Idea: Towards an Economics of Social Labels


  • Torsten Steinrücken


  • Sebastian Jaenichen



The concept of Fair Trade is applied to the marketing of a variety of goods. In recent years it has met a continually increasing interest among consumers. Different Fair Trade organizations are trying to accomplish an improvement in working and living conditions in developing countries by means of Fair Trade certificates and by paying a price markedly above world market standard. This is meant to lead to the attainment of basic social standards, especially in agricultural production. The article deals with how Fair Trade works and whether the social aims can be achieved by the application of this trade concept. Our main result is that even though efficiency of redistribution through the Fair Trade institutions is lower than through traditional relief organizations, the Fair Trade concept provides an additional incentive to support better living conditions in the Third World. Moreover, it provides a stimulus for producers to reorganize the production process in a socially more acceptable manner even when this is not rewarded by the Fair Trade company. Copyright Springer Science+Business Media, LLC 2007

Suggested Citation

  • Torsten Steinrücken & Sebastian Jaenichen, 2007. "The Fair Trade Idea: Towards an Economics of Social Labels," Journal of Consumer Policy, Springer, vol. 30(3), pages 201-217, September.
  • Handle: RePEc:kap:jcopol:v:30:y:2007:i:3:p:201-217
    DOI: 10.1007/s10603-007-9034-5

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    References listed on IDEAS

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    6. Sandler, Todd & Tschirhart, John T, 1980. "The Economic Theory of Clubs: An Evaluative Survey," Journal of Economic Literature, American Economic Association, vol. 18(4), pages 1481-1521, December.
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    Cited by:

    1. Stefan Hoffmann & Katharina Hutter, 2012. "Carrotmob as a New Form of Ethical Consumption. The Nature of the Concept and Avenues for Future Research," Journal of Consumer Policy, Springer, vol. 35(2), pages 215-236, June.
    2. Hannes Koppel & Günther Schulze, 2013. "The Importance of the Indirect Transfer Mechanism for Consumer Willingness to Pay for Fair Trade Products—Evidence from a Natural Field Experiment," Journal of Consumer Policy, Springer, vol. 36(4), pages 369-387, December.
    3. Tierney Bondy & Vishal Talwar, 2011. "Through Thick and Thin: How Fair Trade Consumers Have Reacted to the Global Economic Recession," Journal of Business Ethics, Springer, vol. 101(3), pages 365-383, July.
    4. Gaëlle Balineau & Ivan Dufeu, 2010. "Are Fair Trade Goods Credence Goods? A New Proposal, with French Illustrations," Journal of Business Ethics, Springer, vol. 92(2), pages 331-345, April.
    5. A. Leeuw & Pierre Valois & Alexandre Morin & Peter Schmidt, 2014. "Gender Differences in Psychosocial Determinants of University Students’ Intentions to Buy Fair Trade Products," Journal of Consumer Policy, Springer, vol. 37(4), pages 485-505, December.
    6. Schollenberg, Linda, 2011. "So how much do you pay for ethical consumption? Estimating the hedonic price for Fair Trade coffee in Sweden," HUI Working Papers 31, HUI Research.


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