The Effects of Fair Trade Certification: Evidence from Coffee Producers in Costa Rica

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.