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‘Made in Dignity’: the redistributive impact of Fair Trade

Author

Listed:
  • Jean-Marie Baland

    (University of Namur)

  • François Woitrin

    (University of Namur)

  • Cédric Duprez

    (National Bank of Belgium)

  • Wouter Gelade

    (University of Namur)

Abstract

In this paper, we develop a model of North-South trade to investigate the impact of Fair Trade. In the absence of a label, Southern producers are exploited by monopsonisitic traders who export to Northern markets. The Fair Trade label certifies the adoption of high labour standards and the payment of fair prices to producers in the South. We first show that the label is never Pareto-improving: the welfare of unlabeled producers in the South falls if and only if the welfare of Northern consumers increases. An expansion of Fair Trade tends to exacerbate those effects. We also show that the consequences of fair trade are systematically dampened in environments where traders enjoy more market power.

Suggested Citation

  • Jean-Marie Baland & François Woitrin & Cédric Duprez & Wouter Gelade, 2024. "‘Made in Dignity’: the redistributive impact of Fair Trade," DeFiPP Working Papers 2407, University of Namur, Development Finance and Public Policies.
    • Handle: RePEc:nam:defipp:2407
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    File URL: https://defipp.unamur.be/wp/defipp_wp_2024_7.pdf
    File Function: First version, 2024
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