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.