A positive analysis of Fairtrade certification

Podhorsky, Andrea

doi:10.1016/j.jdeveco.2015.03.008

Cited by 39 publications

(25 citation statements)

References 23 publications

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“…Fairtrade critics suggested that consumers should donate money to coffee farmers (supposedly via some institution) instead of buying Fairtrade coffee (Weber 2007;Griffiths 2014;Leclair 2002;De Janvry et al 2015;Claar and Haight 2015). Reinstein and Song (2012) and Podhorsky (2015) developed models that show the conditions required for Fairtrade to increase market efficiency. They are clearly far from fulfilled in the Swedish coffee market, as roasters' and retailers' excess margins for Fairtrade are large relative to the producer countries' (and thus farmers') benefits.…”

Section: Discussionmentioning

confidence: 99%

“…Following Podhorsky (2015), we assume there is imperfect competition in the Swedish coffee market (i.e., that price is equal to marginal cost multiplied by a price markup). Retail prices and some of the marginal cost components, such as the Fairtrade certification fee, P FTC , and the cost of Fairtrade beans, P BF , and conventional beans, P BC , are known, while most other costs, such as wage, packaging and transport costs, P O , can be assumed to be the same for Fairtrade and conventional coffee.…”

Section: Methodsmentioning

confidence: 99%

“…where MU is the markup on roasted coffee in general and MU F a markup that potentially is charged on Fairtrade coffee in addition to MU. Reinstein and Song (2012) and Podhorsky (2015) assumed that MU F is zero or very small, implying that the premium paid for Fairtrade coffee by consumers only reflects the extra production costs. By rearranging terms in Equations (1) and (2), we get…”

Section: Methodsmentioning

confidence: 99%

“…However, these values are of key interest since they indicate how much of the consumer market Fairtrade premium ends up in the pockets of roasters and retail chains. Fairtrade increases market efficiency if (MA GF − MA G ) + MA F , plus other costs associated with Fairtrade, are smaller than the benefits accruing to the Fairtrade farmers (Reinstein and Song 2012;Podhorsky 2015).…”

Section: Methodsmentioning

confidence: 99%

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Fairtrade and Market Efficiency: Fairtrade-Labeled Coffee in the Swedish Coffee Market

Durevall

2020

Economies

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Fairtrade labeling has the potential to increase market efficiency by connecting farmers to altruistic consumers who are willing to pay a premium for sustainability-certified products. A requirement for increased efficiency, though, is that the farmers' benefits are larger than the Fairtrade processing costs and the excess payment by consumers that does not accrue to farmers; otherwise direct transfers to farmers would be more efficient. This paper analyzes how excess payment for Fairtrade-labeled coffee is distributed in the Swedish market, using information on production costs and scanner data on almost all roasted and ground coffee products sold by retailers. A key finding is that roasters and retailers get 61-70%, while producer countries, in this paper comprising coffee farmers, cooperatives, middlemen, exporters, and Fairtrade International, get 24-31%; Fairtrade Sweden gets 6-8%. These values are the upper and lower bounds that reflect assumptions made about the additional costs of producing roasted and ground Fairtrade coffee, given the cost of beans and the Fairtrade license. The Fairtrade label thus seems to create a coffee product that roasters and retailers can use to exploit their market power.

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Section: Discussionmentioning

confidence: 99%

Section: Methodsmentioning

confidence: 99%

Section: Methodsmentioning

confidence: 99%

Section: Methodsmentioning

confidence: 99%

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Fairtrade and Market Efficiency: Fairtrade-Labeled Coffee in the Swedish Coffee Market

Durevall

2020

Economies

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“…Previous theoretical research on fairtrade has modeled an NGO label maximizing farmer welfare (Podhorsky, 2015;Richardson and Stähler, 2014;Chambolle and Poret, 2013). However, it is difficult to argue that the FLO price policy is aimed at maximizing farmer welfare.…”

Section: Coffee Market and Fairtradementioning

confidence: 99%

Competition between For-Profit and Industry Labels: The Case of Social Labels in the Coffee Market

Baake

Naegele

2017

SSRN Journal

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in Competition between for-profit and industry labelsThe case of social labels in the coffee market * Pio Baake † Helene Naegele ‡ September 19, 2017 AbstractWe model strategic interaction on a market where two labeling organizations compete and firms in duopoly decide which labels to offer. The incumbent label maximizes its own profit, and is challenged by an industry standard which maximizes industry profit. Using a nested logit, the result of this multi-stage game depends crucially on the degree of horizontal differentiation. Joint firm profit always increases with the introduction of the industry standard. The industry standard wants to segment the market and strategically distorts its label quality downwards, such that each firm specializes in a different label. Social welfare however increases with the number of labeled products. A policy imposing a minimum label quality is only binding in the case of strategic quality distortion by the industry standard.JEL classification: L15, D43, L13

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Impact Assessment of Commodity Standards: Pathways for Sustainability and Inclusiveness

Ruben¹

2019

Natural Resource Management in Transition

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A positive analysis of Fairtrade certification

Cited by 39 publications

References 23 publications

Fairtrade and Market Efficiency: Fairtrade-Labeled Coffee in the Swedish Coffee Market

Fairtrade and Market Efficiency: Fairtrade-Labeled Coffee in the Swedish Coffee Market

Competition between For-Profit and Industry Labels: The Case of Social Labels in the Coffee Market

Impact Assessment of Commodity Standards: Pathways for Sustainability and Inclusiveness

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