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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

Pierre Kohler ()

No 06-2007, IHEID Working Papers from Economics Section, The Graduate Institute of International Studies

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.

Keywords: Coffee; Fair Trade; Development; Clean-Washing; Treatment Regression (search for similar items in EconPapers)
JEL-codes: C31 D83 H23 M39 (search for similar items in EconPapers)
Pages: 65
Date: 2006-08, Revised 2006-10
New Economics Papers: this item is included in nep-agr, nep-his and nep-int
References: View references in EconPapers View complete reference list from CitEc
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