Working Paper: CEPR ID: DP7459
Authors: Nancy H. Chau; Hideaki Goto; Ravi Kanbur
Abstract: In many markets in developing countries, especially in remote areas, middlemen are thought to earn excessive profits. Non-profits come in to counter what is seen as middlemen's market power, and rich country consumers pay a 'fair-trade' premium for products marketed by such non-profits. This paper provides answers to the following five questions. How exactly do middlemen and non-profits divide up the market? How do the price mark up and price pass-through differ between middleman and non-profits? What is the impact of non-profits entry on the wellbeing of the poor? Should the government subsidize the entry of non-profits, or the entry of middlemen? Should wealthy consumers in the North pay a premium for fair trade products, or should they support fair trade non-profits directly?
Keywords: Market Access; Middlemen; Nonprofits; Poverty
JEL Codes: F15; I32
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| entry of nonprofits (L31) | increase in average price of exports for producers (F14) |
| entry of nonprofits (L31) | increase in local producer revenue (F61) |
| entry of nonprofits (L31) | improve responsiveness of local producer revenue to changes in border prices (F16) |
| government subsidies for nonprofits (L31) | influence distribution of market power among producers (L11) |
| government subsidies for middlemen (D40) | influence distribution of market power among producers (L11) |