An Economic Analysis of the Effects of Fair-Trade with Rumination on the Popularity of Economists
Journal of Public Finance and Public Choice (2012)
Posted: 12 Nov 2014
Date Written: 2012
We analyze the effects of fair-trade programs, which allow people to pay extra for products expecting that the premium will improve the lives of poor people in poor countries. We assume these programs are operated exactly as those donating would ideally like them to be. All the money paid in excess of the market price and reasonable administrative costs are transferred to either the workers, or used to improve their communities and working conditions. We demonstrate that these transfers do not help the intended workers, and may harm them and capital owners who hire the workers receive most of the benefit from fair-trade. We end with thoughts on the tendency for many to dismiss economists as aggravating nuisances.
Keywords: fair trade, labor, rent-seeking
JEL Classification: F12, F13, J8
Suggested Citation: Suggested Citation