The Fair Trade movement:an economic perspective

Alexander Kadow (alexander.kadow@bundesbank.de)

Working Papers from Business School - Economics, University of Glasgow

Abstract: Fair Trade (FT) products such as coffee and textiles are becoming increasingly popular with altruistic consumers all over the world. This paper seeks to understand the economic effects of this grassroots movement which directly links ethically-minded consumers in industrialised countries with marginalised producers in developing economies. We extend the Ricardian trade model and introduce a FT sector in developing South that offers a fair wage – the FT premium. There are indeed positive welfare effects from FT but those come at the expense of rising inequalities within South which are in turn a rational by-product of FT. The degree of inequalities depends on the specifics of the cooperative structures in the FT sector. Given the rigidities and inequalities FT introduces and rests upon, this form of alternative trade appears to be only sustainable as niche movement.

Keywords: Fair Trade; comparative advantage; wage premium; inequalities; ethical consumerism; cooperative (search for similar items in EconPapers)
JEL-codes: F11 O11 Q13 (search for similar items in EconPapers)
Date: 2011-02
New Economics Papers: this item is included in nep-agr, nep-hme and nep-int
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Working Paper: The Fair Trade movement: an economic perspective (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:gla:glaewp:2011_05

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