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'Fairtrade' and Market Failures in Agricultural Commodity Markets

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dc.contributor.author Ronchi, Loraine
dc.date.accessioned 2010-09-17T20:25:34Z
dc.date.available 2010-09-17T20:25:34Z
dc.date.issued 2006 en_US
dc.identifier.uri https://hdl.handle.net/10535/6352
dc.description.abstract "This paper concerns an NGO intervention in agricultural commodity markets known as Fairtrade. Fairtrade pays producers a minimum unit price and provides capacity building support to member cooperative organizations. Fairtrade's organizational capacity support targets those factors believed to reduce the commodity producer's share of returns. Specifically, Fairtrade justifies its intervention in markets like coffee by claiming that market power and a lack of capacity in producer organizations 'marks down' the prices producers receive. As the market share of Fairtrade coffee grows in importance, its intervention in commodity markets is of increasing interest. Using an original data set collected from fieldwork in Costa Rica, this paper assesses the role of Fairtrade in overcoming the market factors it claims limits producer returns. Features of the Costa Rican input market for coffee permit a generalization of the results. The empirical results find that market power is a limiting factor in the Costa Rican market and that Fairtrade does improve the efficiency of cooperatives, thereby increasing the returns to producers. These results do not depend on the minimum price policy of Fairtrade and therefore can inform on its organizational support activities. Finally, the results also suggest that producers selling to vertically integrated, multinational coffee mills face lower producer price 'mark-downs' compared with domestically owned non-cooperative mills. This result contradicts the popular view that the increasing concentration of vertically integrated multinational firms accounts for a decline in producers' share of coffee returns." en_US
dc.language English en_US
dc.relation.ispartofseries World Bank Policy Research Working Paper, no. 4011 en_US
dc.subject agriculture en_US
dc.subject markets en_US
dc.subject commodification en_US
dc.subject economic theory en_US
dc.title 'Fairtrade' and Market Failures in Agricultural Commodity Markets en_US
dc.type Working Paper en_US
dc.type.methodology Case Study en_US
dc.subject.sector Agriculture en_US

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