 On the efficiency of fair tradeReview of Social Economy, 2006, vol. 64, issue 4, 447-468 Abstract: This paper uses competitive equilibrium theory to analyze the economic efficiency of international “fair trade” between ethical consumers and low-income producers. The main analytical innovations are the reconsideration of the labor supply decision in a state of Keynesian involuntary unemployment as a choice between work and, not leisure, but inferior production activities; and the application of Pigou and Robinson's theory of employer monopsony, leading to a focus on the “local fair trade organization”, which has a similar effect to a labor union or minimum wage in eliminating monopsony rents. A price premium is found neither necessary nor sufficient for fair trade, and in a state of involuntary unemployment a premium does not lead to inefficient allocation. The conclusion is that fair trade improves welfare by strengthening competition for labor, and should be encouraged as a complementary element of an enlightened trade liberalization policy. Keywords: fair trade; efficiency; involuntary unemployment; monopsony (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:taf:rsocec:v:64:y:2006:i:4:p:447-468 Ordering information: This journal article can be ordered from DOI: 10.1080/00346760601024419 Access Statistics for this article Review of Social Economy is currently edited by Wilfred Dolfsma and John Davis More articles in Review of Social Economy from Taylor & Francis Journals |
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