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Fair Trade: A 'Third Generation' Welfare Mechanism to Make Globalisation Sustainable

  • Fabrizio Adriani

    ()

    (University of Rome II - Centre for International Studies on Economic Growth (CEIS))

  • Leonardo Becchetti

    ()

    (University of Rome II - Faculty of Economics)

Globalisation of product and labour markets has dramatically evidenced the market failure generated by the monopsonistic/oligopsonistic power of exporters dealing with unskilled workers (subcontractors). The absence of a global benevolent planner and unequal representation mechanisms in international institutions prevent the reduction of imbalances in the bargaining power between employers and unskilled workers. In a model of North-South trade we suggest that, under the existence of a share of altruistic consumers in the North, the effects of market imperfections and the absence of a global benevolent planner may be partially alleviated by a bottom-up welfare approach directly promoted by consumers of the final product. Our results also show that ethical concerns of consumers in the North might end up with reducing the welfare of workers in the South unless ethical concerned producers enter the market.

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Paper provided by Tor Vergata University, CEIS in its series CEIS Research Paper with number 62.

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Length: 31
Date of creation: 26 Nov 2004
Date of revision:
Handle: RePEc:rtv:ceisrp:62
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  1. Robert Feenstra, 2003. "Integration Of Trade And Disintegration Of Production In The Global Economy," Working Papers 986, University of California, Davis, Department of Economics.
  2. Lawrence F. Katz & Alan B. Krueger, 1999. "The High-Pressure U.S. Labor Market of the 1990s," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 30(1), pages 1-88.
  3. Rodrik, Dani, 1998. "Where Did all the Growth Go? External Shocks, Social Conflict and Growth Collapses," CEPR Discussion Papers 1789, C.E.P.R. Discussion Papers.
  4. Bleaney, Michael & Greenaway, David, 2001. "The impact of terms of trade and real exchange rate volatility on investment and growth in sub-Saharan Africa," Journal of Development Economics, Elsevier, vol. 65(2), pages 491-500, August.
  5. David Hummels & Jun Ishii & Kei-Mu Yi, 1999. "The nature and growth of vertical specialization in world trade," Staff Reports 72, Federal Reserve Bank of New York.
  6. George A. Akerlof & Andrew K. Rose & Janet L. Yellen & Helga Hessenius, 1991. "East Germany in from the Cold: The Economic Aftermath of Currency Union," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 22(1), pages 1-106.
  7. Dixit, Avinash & Norman, Victor, 1986. "Gains from trade without lump-sum compensation," Journal of International Economics, Elsevier, vol. 21(1-2), pages 111-122, August.
  8. Robert Feenstra & Gordon Hanson, 2001. "Global Production Sharing and Rising Inequality: A Survey of Trade and Wages," NBER Working Papers 8372, National Bureau of Economic Research, Inc.
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