The Effects of Fair Trade When Productivity Differences Matter

This paper uses a heterogeneous firms model to scrutinize the alleged aim of Fair Trade to help the most disadvantaged producers in developing countries. Incorporating important aspects of Fair Trade in a two-good heterogeneous firm model we show that the more productive firms will join Fair Trade a...

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Bibliographic Details
Published inIDEAS Working Paper Series from RePEc
Main Authors de Vaal, Albert, Breimer, Marten
Format Paper
LanguageEnglish
Published St. Louis Federal Reserve Bank of St. Louis 01.01.2012
Subjects
Fair trade
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Summary:This paper uses a heterogeneous firms model to scrutinize the alleged aim of Fair Trade to help the most disadvantaged producers in developing countries. Incorporating important aspects of Fair Trade in a two-good heterogeneous firm model we show that the more productive firms will join Fair Trade arrangements. Presuming that the least advantaged producers are those with lowest productivity, it thus appears that Fair Trade cannot live up to its expectations.