When Consumption Generates Social Capital: Creating Room for Manoeuvre for Pro-Poor Policies

Economic interactions are often accused of being neutral, or even of generating adverse effects, not only on the social fabric but also on a factor (social capital) which is regarded as the foundation of both socio-economic activity and prosperity. In this paper we document how a particular form of economic interaction (affiliation of marginalised producers to a first level association and to the fair trade import channel) has indeed positive effects on a specific type of social capital. Our findings on a sample of Kenyan farmers show that years of affiliation to Fair Trade significantly affect the participation in elections and the trust placed in trade unions, political parties and the government, net of the impact of other controls and after accounting for the selection bias effect. This implies that consumers buying fair trade products contribute to reinforce both social cohesion and the institutions in countries in which these variables are fundamental in creating room for manoeuvre for pro-poor (equity plus growth) policies.