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
This paper considers the system of fair trade coffee. It first gives a short description of the coffee market and some of its major trends. The origin of the fair trade movement is then explained. The structure of FLO is examined and its pricing scheme compared to those of other private labeling initiatives. Benefits generated for participants on the supply and the demand side then come under scrutiny. To gauge its potential as a development tool, revenues to coffee producers are estimated on the basis of available information. Revenues to fair trade organizations in the Western world are also examined. Finally, two hypotheses are tested on data from 13 European countries to get a better picture of what is happening on the demand side. First, an OLS regression is tested to see if consumer awareness does Òmake a differenceÓ. Secondly, a treatment regression is used to correct for a sample self-selection bias and to check if there is some support for the claim that supermarkets that have started to sell fair trade coffee are clean-washing their reputation in the fair trade business.
|Date of creation:||Aug 2006|
|Date of revision:||Oct 2006|
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- Fabrizio Adriani & Leonardo Becchetti, 2004. "Fair Trade: A 'Third Generation' Welfare Mechanism to Make Globalisation Sustainable," CEIS Research Paper 62, Tor Vergata University, CEIS.
- Becchetti, Leonardo & Solferino, Nazaria, 2005. "The dynamics of ethical product differentiation and the habit formation of socially responsible consumers," AICCON Working Papers 8-2005, Associazione Italiana per la Cultura della Cooperazione e del Non Profit.
- Mayke Kok & Richard Nahuis & A. de Vaal, 2002.
"On labour standards and free trade,"
CPB Discussion Paper
11, CPB Netherlands Bureau for Economic Policy Analysis.
- Michiel Kok & Richard Nahuis & Albert de Vaal, 2004. "On labour standards and free trade," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 13(2), pages 137-158.
- Krivonos, Ekaterina, 2004.
"The impact of coffee market reforms on producer prices and price transmission,"
Policy Research Working Paper Series
3358, The World Bank.
- Krivonos, Ekaterina, 2005. "The impact of coffee market reforms on producer prices and price transmission," 2005 Annual meeting, July 24-27, Providence, RI 19315, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
- Bacon, Christopher, 2005. "Confronting the Coffee Crisis: Can Fair Trade, Organic, and Specialty Coffees Reduce Small-Scale Farmer Vulnerability in Northern Nicaragua?," World Development, Elsevier, vol. 33(3), pages 497-511, March.
- Giovannucci, Daniele & Koekoek, Freek Jan, 2003. "The State of Sustainable Coffee: A Study of Twelve Major Markets," MPRA Paper 17172, University Library of Munich, Germany.
- Morisset, Jacques, 1998. "Unfair Trade? The Increasing Gap between World and Domestic Prices in Commodity Markets during the Past 25 Years," World Bank Economic Review, World Bank Group, vol. 12(3), pages 503-26, September.
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