Working Paper: NBER ID: w24260
Authors: Raluca Dragusanu; Eduardo Montero; Nathan Nunn
Abstract: We study the effects of Fair Trade (FT) certification of coffee on producers and households in Costa Rica. Examining the production dynamics of all Costa Rican coffee mills from 1999–2014, we find that when global coffee prices are lower and the FT guaranteed minimum price is binding, FT certification is associated with a higher sales price, greater sales, and more revenues. We also find that certification reduces the probability of a mill closing down and exiting the industry. Looking at households, we find that certification is associated with higher incomes for farm owners. Part of this is due to a transfer of incomes from 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.
Keywords: fair trade; coffee; Costa Rica; certification; income effects
JEL Codes: F14; F63; O13; O54
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| FT certification (Y20) | higher sales prices (D49) |
| FT certification (Y20) | greater sales volumes (L25) |
| FT certification (Y20) | increased revenues for certified mills (L73) |
| FT certification (Y20) | reduced likelihood of a mill closing down (L68) |
| FT certification (Y20) | positive impact on incomes for farm owners (Q15) |
| FT certification (Y20) | income losses for intermediaries (F61) |
| FT certification (Y20) | decrease in income inequality within the sector (D31) |
| FT certification (Y20) | no significant income effects for unskilled workers (F66) |
| FT certification (Y20) | no positive effects on educational outcomes for children of farm owners or unskilled workers (J43) |
| FT certification (Y20) | adverse effects for children of intermediaries (J13) |