Fair Trade is probably the most popular ethical label. You may have seen the round blue and green logo on lots of products: coffee, bananas, tea, and maybe even sports balls. The goal of the label is to improve the lives of the poor in developing countries by offering better trading terms to producers and helping them to organize. In exchange, to obtain the Fair Trade certification, farmers need to adhere to a list of environmental and labor standards.
Although Fair Trade-certified products still comprise a small share of the market, growth has been very rapid over the past decade. In 2014 alone, world sales of Fair Trade products were more than $6.5 billion and around 1.5 million farmers were part of a Fair Trade organization.
My research with Nathan Nunn asks whether Fair Trade actually works in delivering on its promise of alleviating poverty and building institutions.
The Impacts of Fair Trade Certification: Evidence from Coffee Producers in Costa Rica (with Nathan Nunn). Working paper.
In this paper, we estimate the effects of Fair Trade (FT) certification on coffee producers in Costa Rica and find that FT certification is associated with higher export prices, equal to approximately 4 cents per pound. Linking the producer-level information on FT certification to individual-level survey data, we find that FT certification increases income, but only for skilled coffee growers and farm owners. We find no evidence that many workers, including unskilled seasonal coffee pickers, benefit from certification.
- Costa Rica Household Surveys 2003 - 2009
- Coffee sales data from Costa Rica's National Coffee Institute
- Fair Trade certification data from Fairtrade International
We provide an overview of the primary requirements of Fair Trade, as well as the potential benefits and pitfalls from a theoretical and practical point of view. We also discuss the empirical evidence for whether Fair Trade is successful in accomplishing its goals of helping lift Fair Trade certified farmers out of poverty, providing stability, and encouraging farmers to engage in environmentally-responsible production.