Fair Trade: A 'Third Generation' Welfare Mechanism to Make Globalisation Sustainable

31 Pages Posted: 26 Nov 2004

See all articles by Fabrizio Adriani

Fabrizio Adriani

University of Rome Tor Vergata - Centre for International Studies on Economic Growth (CEIS)

Leonardo Becchetti

University of Rome Tor Vergata - Faculty of Economics

Date Written: November 2004

Abstract

Globalisation of product and labour markets has dramatically evidenced the market failure generated by the monopsonistic/oligopsonistic power of exporters dealing with unskilled workers (subcontractors). The absence of a global benevolent planner and unequal representation mechanisms in international institutions prevent the reduction of imbalances in the bargaining power between employers and unskilled workers. In a model of North-South trade we suggest that, under the existence of a share of altruistic consumers in the North, the effects of market imperfections and the absence of a global benevolent planner may be partially alleviated by a bottom-up welfare approach directly promoted by consumers of the final product. Our results also show that ethical concerns of consumers in the North might end up with reducing the welfare of workers in the South unless ethical concerned producers enter the market.

Keywords: monopsony, social responsibility, fairness

JEL Classification: F02, F13, L31

Suggested Citation

Adriani, Fabrizio and Becchetti, Leonardo, Fair Trade: A 'Third Generation' Welfare Mechanism to Make Globalisation Sustainable (November 2004). Available at SSRN: https://ssrn.com/abstract=625562 or http://dx.doi.org/10.2139/ssrn.625562

Fabrizio Adriani

University of Rome Tor Vergata - Centre for International Studies on Economic Growth (CEIS) ( email )

Via Columbia, 2
I-00133 Rome
Italy

Leonardo Becchetti (Contact Author)

University of Rome Tor Vergata - Faculty of Economics ( email )

Via Columbia, 2
I-00133 Rome
Italy

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
636
Abstract Views
3,439
rank
45,014
PlumX Metrics