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The Effects of Fair Trade When Productivity Differences Matter

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  • Albert de Vaal
  • Marten Breimer

Abstract

This paper uses a heterogeneous firms model to scrutinize the alleged aim of Fair Trade to help the most disadvantaged producers in developing countries. Incorporating important aspects of Fair Trade in a two-good heterogeneous firm model we show that the more productive firms will join Fair Trade arrangements. Presuming that the least advantaged producers are those with lowest productivity, it thus appears that Fair Trade cannot live up to its expectations.

Suggested Citation

  • Albert de Vaal & Marten Breimer, 2012. "The Effects of Fair Trade When Productivity Differences Matter," DEGIT Conference Papers c017_017, DEGIT, Dynamics, Economic Growth, and International Trade.
  • Handle: RePEc:deg:conpap:c017_017
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    File URL: http://degit.sam.sdu.dk/papers/degit_17/C017_017.pdf
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    References listed on IDEAS

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    1. Mark Hayes, 2006. "On the efficiency of fair trade," Review of Social Economy, Taylor & Francis Journals, vol. 64(4), pages 447-468.
    2. Andrew B. Bernard & Stephen J. Redding & Peter K. Schott, 2010. "Multiple-Product Firms and Product Switching," American Economic Review, American Economic Association, vol. 100(1), pages 70-97, March.
    3. Dennis Yanchus & Xavier de Vanssay, 2003. "The Myth of Fair Prices: A Graphical Analysis," The Journal of Economic Education, Taylor & Francis Journals, vol. 34(3), pages 235-240, January.
    4. LeClair, Mark S., 2002. "Fighting the Tide: Alternative Trade Organizations in the Era of Global Free Trade," World Development, Elsevier, vol. 30(6), pages 949-958, June.
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