Fair Trade - Is It Really Fair?
One of the arguments against the Fair Trade scheme is that the guaranteed minimum price tends to depress world prices and thus the incomes of non-participating farmers (e.g. The Economist, 2006). We develop a model that distinguishes between the impact of the introduction of a Fair Trade market per se and the effect of minimum price policies given that a Fair Trade market actually exists. The model suggests that the claims against Fair Trade might not be correct. The introduction of a Fair Trade market may increase the incomes of both participating and non-participating farmers. The minimum contracting price as part of Fair Trade standards, however, precludes the full realization of the program’s potential benefits. The minimum price also paradoxically increases the profits of the middlemen whose local monopsony power the Fair Trade scheme originally aimed to retrench. Furthermore, the total surplus generated by Fair Trade cooperatives declines as the guaranteed price increases.
|Date of creation:||Sep 2008|
|Date of revision:|
|Contact details of provider:|| Postal: P.O. Box 882, Politickych veznu 7, 111 21 Praha 1|
Phone: (+420) 224 005 123
Fax: (+420) 224 005 333
Web page: http://www.cerge-ei.cz
More information through EDIRC
References listed on IDEAS
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.:
- AfDB AfDB, . "African Development Report 2004," African Development Report, African Development Bank, number 21 edited by Adeleke Oluwole Salami, 3.
When requesting a correction, please mention this item's handle: RePEc:cer:papers:wp367. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Jana Koudelkova)
If references are entirely missing, you can add them using this form.