A Survey of the Economics of Fair Trade

32 Pages Posted: 24 May 2014

See all articles by Ana Dammert

Ana Dammert

McMaster University; IZA Institute of Labor Economics

Sarah A Mohan

Carleton University

Abstract

Fair Trade has spread in developing countries as an initiative aimed at lifting poor smallholder farmers out of poverty by providing them with premium prices, availability of credit, and improved community development and social goods. Fair Trade is also viewed as a niche market for high value products in a context of globalization and trade liberalization policies that affect smallholder farmers in developing countries. The question of whether Fair Trade affects the welfare of rural farmers, however, is particularly contentious. This paper provides a review of the Fair Trade literature, both theoretical and empirical, with a specific focus on the analysis of small-scale producer's welfare in developing countries. Our review shows that while most empirical papers have focused on the impacts of Fair Trade on prices and income, our review highlights the importance of limited market access and changes in productivity. Likewise, little is known about the impacts of Fair Trade on labor markets and human capital investments. Persistent methodological challenges make it challenging, however, to assess the causal impact of this certification and labelling initiative.

Keywords: Fair Trade, developing countries, market efficiency

JEL Classification: O19, P46

Suggested Citation

Dammert, Ana and Mohan, Sarah A, A Survey of the Economics of Fair Trade. IZA Discussion Paper No. 8167, Available at SSRN: https://ssrn.com/abstract=2441463

Ana Dammert (Contact Author)

McMaster University ( email )

1280 Main Street West
Hamilton, Ontario L8S 4M4
Canada

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Sarah A Mohan

Carleton University ( email )

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