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The Economics of Fair Trade

Author

Listed:
  • Raluca Dragusanu
  • Daniele Giovannucci
  • Nathan Nunn
Abstract
Fair Trade is a labeling initiative aimed at improving the lives of the poor in developing countries by offering better terms to producers and helping them to organize. Although Fair Trade–certified products still comprise a small share of the market—for example, Fair Trade–certified coffee exports were 1.8 percent of global coffee exports in 2009—growth has been very rapid over the past decade. Whether Fair Trade can achieve its intended goals has been hotly debated in academic and policy circles. In particular, debates have been waged about whether Fair Trade makes "economic sense" and is sustainable in the long run. The aim of this article is to provide a critical overview of the economic theory behind Fair Trade, describing the potential benefits and potential pitfalls. We also provide an assessment of the empirical evidence of the impacts of Fair Trade to date. Because coffee is the largest single product in the Fair Trade market, our discussion here focuses on the specifics of this industry, although we will also point out some important differences with other commodities as they arise.

Suggested Citation

  • Raluca Dragusanu & Daniele Giovannucci & Nathan Nunn, 2014. "The Economics of Fair Trade," Journal of Economic Perspectives, American Economic Association, vol. 28(3), pages 217-236, Summer.
    • Handle: RePEc:aea:jecper:v:28:y:2014:i:3:p:217-36
    Note: DOI: 10.1257/jep.28.3.217
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    References listed on IDEAS

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    More about this item

    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • I38 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Government Programs; Provision and Effects of Welfare Programs
    • O15 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration
    • O19 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - International Linkages to Development; Role of International Organizations

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