IDEAS home Printed from https://ideas.repec.org/p/gii/giihei/heiwp06-2007.html
   My bibliography  Save this paper

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

Author

Abstract

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.

Suggested Citation

  • Pierre Kohler, 2006. "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," IHEID Working Papers 06-2007, Economics Section, The Graduate Institute of International Studies, revised Oct 2006.
    • Handle: RePEc:gii:giihei:heiwp06-2007
    as

    Download full text from publisher

    File URL: http://repec.graduateinstitute.ch/pdfs/Working_papers/HEIWP06-2007.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. 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.
    2. Krivonos, Ekaterina, 2004. "The impact of coffee market reforms on producer prices and price transmission," Policy Research Working Paper Series 3358, The World Bank.
    3. Leonardo Becchetti & Nazaria Solferino & M. Elisabetta Tessitore, 2005. "The dynamics of socially responsible product differentiation and the habit formation of socially responsible consumers," Working Papers 03, ECINEQ, Society for the Study of Economic Inequality.
    4. Morisset, Jacques, 1998. "Unfair Trade? The Increasing Gap between World and Domestic Prices in Commodity Markets during the Past 25 Years," The World Bank Economic Review, World Bank, vol. 12(3), pages 503-526, September.
    5. 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.
    6. 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.
    7. Fabrizio Adriani & Leonardo Becchetti, 2004. "Fair Trade: A 'Third Generation' Welfare Mechanism to Make Globalisation Sustainable," CEIS Research Paper 62, Tor Vergata University, CEIS.
    8. 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.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Suphanit Piyapromdee & Russell Hillberry & Donald MacLaren, 2014. "‘Fair trade’ coffee and the mitigation of local oligopsony power," European Review of Agricultural Economics, Oxford University Press and the European Agricultural and Applied Economics Publications Foundation, vol. 41(4), pages 537-559.
    2. Leonardo Becchetti & Pierluigi Conzo & Fabio Pisani, 2011. "Virtuous Interactions in Removing Exclusion: The Link between Foreign Market Access and Access to Education," Journal of Development Studies, Taylor & Francis Journals, vol. 47(9), pages 1431-1454, September.
    3. Leonardo Becchetti & Stefano Castriota, 2008. "Is Fair Trade Honey Sweeter? An empirical analysis on the effect of affiliation on productivity," Working Papers 104, ECINEQ, Society for the Study of Economic Inequality.
    4. Leonardo Becchetti & Stefano Castriota & Melania Michetti, 2013. "The effect of fair trade affiliation on child schooling: evidence from a sample of Chilean honey producers," Applied Economics, Taylor & Francis Journals, vol. 45(25), pages 3552-3563, September.
    5. Brigitte Granville, 2009. "Trust In Fairtrade: The 'Feel-Good' Effect," Working Papers 27, Queen Mary, University of London, School of Business and Management, Centre for Globalisation Research.
    6. Njindan Iyke, Bernard, 2016. "Real Output and Oil Price Uncertainty: Evidence from an Oil Producing Country," MPRA Paper 71307, University Library of Munich, Germany, revised 01 Apr 2016.
    7. Aye, Goodness C. & Dadam, Vincent & Gupta, Rangan & Mamba, Bonginkosi, 2014. "Oil price uncertainty and manufacturing production," Energy Economics, Elsevier, vol. 43(C), pages 41-47.
    8. Kang, Hyunsoo & Kennedy, P. Lynn, 2009. "Empirical Evidences from a Coffee Paradox: An Export Supply/Price Asymmetry Approach," Journal of Rural Development/Nongchon-Gyeongje, Korea Rural Economic Institute, vol. 32(3), pages 1-31, July.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Muradian, Roldan & Pelupessy, Wim, 2005. "Governing the coffee chain: The role of voluntary regulatory Systems," World Development, Elsevier, vol. 33(12), pages 2029-2044, December.
    2. Daniel Grandisky Lerner & Helder Marcos Freitas Pereira & Maria Sylvia Macchione Saes & Gustavo Magalhães de Oliveira, 2021. "When Unfair Trade Is Also at Home: The Economic Sustainability of Coffee Farms," Sustainability, MDPI, vol. 13(3), pages 1-14, January.
    3. Alessandro Arrighetti, 2009. "Market Imperfections and Fair Trade," QA - Rivista dell'Associazione Rossi-Doria, Associazione Rossi Doria, issue 1, March.
    4. Martin Richardson & Frank Stähler, 2017. "Fair Trade," World Scientific Book Chapters, in: Dimensions of Trade Policy, chapter 17, pages 359-388, World Scientific Publishing Co. Pte. Ltd..
      • Martin Richardson & Frank Stähler, 2014. "Fair Trade," The Economic Record, The Economic Society of Australia, vol. 90(291), pages 447-461, December.
    5. Sylvaine Poret & Claire Chambolle, 2007. "Fair Trade: In or Out the Market?," Working Papers hal-00243062, HAL.
    6. Luna, Fátima & Wilson, Paul N., 2015. "An Economic Exploration of Smallholder Value Chains: Coffee Transactions in Chiapas, Mexico," International Food and Agribusiness Management Review, International Food and Agribusiness Management Association, vol. 18(3), pages 1-22, September.
    7. Nuva & Yusif & Nia Kurniawati H. & Hanna, 2013. "Impact of Eco-Labelling on Indonesia's Smallholder Coffee Farmers," EEPSEA Research Report rr2013032, Economy and Environment Program for Southeast Asia (EEPSEA), revised Mar 2013.
    8. Bode, Reinhild, 2007. "Qualität statt Masse: Spezialkaffee als Ansatz für eine öko-faire Gestaltung der Wertschöpfungskette," Wuppertal Papers 165, Wuppertal Institute for Climate, Environment and Energy.
    9. Durevall, Dick, 2007. "Demand for coffee in Sweden: The role of prices, preferences and market power," Food Policy, Elsevier, vol. 32(5-6), pages 566-584.
    10. A. Arrighetti, 2007. "Fair trade, premio di prezzo e fallimenti del mercato," Economics Department Working Papers 2007-EP06, Department of Economics, Parma University (Italy).
    11. Brigitte Granville, 2009. "Trust In Fairtrade: The 'Feel-Good' Effect," Working Papers 27, Queen Mary, University of London, School of Business and Management, Centre for Globalisation Research.
    12. Andreas Graichen, 2008. "Fairtrade Labelling in a Bertrand Competition Model with Monopsony Power," Working Papers 050, Bavarian Graduate Program in Economics (BGPE).
    13. L. Lambertini & A. Palestini & A. Tampieri, 2014. "CSR in an Asymmetric Duopoly with Environmental Externalities," Working Papers wp959, Dipartimento Scienze Economiche, Universita' di Bologna.
    14. Wirl, Franz & Feichtinger, Gustav & Kort, Peter M., 2013. "Individual firm and market dynamics of CSR activities," Journal of Economic Behavior & Organization, Elsevier, vol. 86(C), pages 169-182.
    15. Lauren Rosenberg & Mark Swilling & Walter J V Vermeulen, 2018. "Practices of Third Wave Coffee: A Burundian Producer's Perspective," Business Strategy and the Environment, Wiley Blackwell, vol. 27(2), pages 199-214, February.
    16. Laura Raynolds & Douglas Murray & Andrew Heller, 2007. "Regulating sustainability in the coffee sector: A comparative analysis of third-party environmental and social certification initiatives," Agriculture and Human Values, Springer;The Agriculture, Food, & Human Values Society (AFHVS), vol. 24(2), pages 147-163, June.
    17. Bargawi, H. & Newman, S.A., 2013. "From futures markets to the farm-gate," ISS Working Papers - General Series 50215, International Institute of Social Studies of Erasmus University Rotterdam (ISS), The Hague.
    18. Evie Smith & Lisa Antoshak & Patrick H. Brown, 2022. "Grounds for Collaboration: A Model for Improving Coffee Sustainability Initiatives," Sustainability, MDPI, vol. 14(11), pages 1-22, May.
    19. Franck Galtier & Giovanni Belletti & Andrea Marescotti, 2013. "Factors Constraining Building Effective and Fair Geographical Indications for Coffee: Insights from a Dominican Case Study," Development Policy Review, Overseas Development Institute, vol. 31(5), pages 597-615, September.
    20. van Rijsbergen, Bart & Elbers, Willem & Ruben, Ruerd & Njuguna, Samuel N., 2016. "The Ambivalent Impact of Coffee Certification on Farmers’ Welfare: A Matched Panel Approach for Cooperatives in Central Kenya," World Development, Elsevier, vol. 77(C), pages 277-292.

    More about this item

    Keywords

    Coffee; Fair Trade; Development; Clean-Washing; Treatment Regression;
    All these keywords.

    JEL classification:

    • C31 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models; Quantile Regressions; Social Interaction Models
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • M39 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Marketing and Advertising - - - Other

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:gii:giihei:heiwp06-2007. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Dorina Dobre (email available below). General contact details of provider: https://edirc.repec.org/data/ieheich.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.