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

Jean-Marie Baland, François Woitrin (), Cédric Duprez and Wouter Gelade ()
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François Woitrin: University of Namur
Wouter Gelade: University of Namur

No 2407, DeFiPP Working Papers from University of Namur, Development Finance and Public Policies

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.

Pages: 28 pages
Date: 2024-10
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Persistent link: https://EconPapers.repec.org/RePEc:nam:defipp:2407

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