The Effects of Fair Trade Certification: Evidence from Coffee Producers in Costa Rica
We study the effects of Fair Trade (FT) certification of coffee on producers and households in Costa Rica. Examining the production dynamics of the universe of Costa Rican coffee mills from 1999–2014, we find that FT certification is associated with a higher sales price, greater sales, and more revenues. These effects are greater when global coffee prices are lower and the FT guaranteed minimum price is binding. Looking at households, we find robust evidence that FT is associated with higher incomes for farm owners. Part of this is due to a transfer of incomes from farm owners to intermediaries whose incomes decrease due to FT. We find no effect of FT on unskilled workers, who are the more disadvantaged group within the coffee sector.
We thank Stephanie Cappa, Matthew Summers, and Marco Antonio Martinez del Angel for excellent research assistance, Eduardo Montero for helping to facilitate our field visit in Costa Rica, and ICAFE Costa Rica for sharing their data. We also thank Laura Alfaro, David Atkin, Dave Donaldson, Erica Field, Ameet Morjaria, Marc Muendler, Ben Olken, Nina Pavcnik, Andrea Podhorsky, and Christian Volpe, as well as seminar participants at MIT, the IADB, the LACEA-IDB TIGN Annual Conference, and the NBER ITI Summer Institute for valuable comments. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.
- Costa Rican growers, coffee workers, and their neighbors all experience gains; only intermediaries' incomes are reduced. The...