THE IMPACT OF FAIR TRADE FOR POOR FARMERS Ruerd Ruben Centre for International Development Issues (CIDIN) – Radboud University Nijmegen.

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Presentation transcript:

THE IMPACT OF FAIR TRADE FOR POOR FARMERS Ruerd Ruben Centre for International Development Issues (CIDIN) – Radboud University Nijmegen

The Development Impact of Fair Trade

Key Issues Un-biased impact assessment Control for self-selection & unobserved heterogeneity Micro-level + Regional analysis Conventional, Organic & Fair Trade production Life cycle effects Cross-country comparison Smallholders & plantation production

The Development Impact of Fair Trade Fair Trade 1988: Introduction Max Havelaar label in coffee -Minimum price guarantee (set by FLO) -Fairtrade Premium - Environmental + Labour conditions - Market shares: 3-8 %; annual growth 15-20% 1996 : Fair trade fruit; first bananas,followed by mango, pineapple & citrus. - Turnover Euro 62 mln (2006) - Annual growth 40%, Net profit 1.5% - Market share: 5-15 % 2006 : €1.6 billion, 570 organizations families

The Development Impact of Fair Trade Impact Assessment Impact assessment at producers’ level -Direct Income & welfare effects -Expenditure effects -Organizational impact -Gender & Environment Externalities & Spillovers: -Other household activities -Regional level (prices, wages, FT premium) -Risk attitudes

The Development Impact of Fair Trade Difference – in – Difference

The Development Impact of Fair Trade Research Approach 1.Focus on bananas 2.Field samples in 4 countries 3.FT (treatment) & non-FT farmers (control) 4.Organic & Conventional production 1.Questionnaire & indicators 2.Propensity Score Matching (common support) 3.Difference analysis

The Development Impact of Fair Trade Sample Bananas in Northern Peru (N = 200) -Organic FT -Organic non-FT -Conventional non-FT

The Development Impact of Fair Trade Field Sites in Peru Bananas in Piura (Valle de Chira)

The Development Impact of Fair Trade Data Farm-household characteristics banana production (yield, prices) Other (non)agricultural activities Expenditure system (consumption) Wealth (assets), savings & investments Farmers’ Organisation Sustainable practices

The Development Impact of Fair Trade Attitudes & Perceptions Past & Future life perspectives Organizational identification Organizational strength Organizational satisfaction Gender decision domains (male / female / joint) Willingness to invest Risk perceptions

The Development Impact of Fair Trade Key Relationships Household Characteristics (family size, age, gender, education, dependency rate, housing, (fe)male decision domains, etc) Wealth & Assets (income, income composition, expenditures, durable capital, loans & savings, cattle, house improvements) Production & Trade (yield, sales and prices by season; land & labour productivity, profits, etc) Perceptions:  fair trade  welfare  risk attitudes Membership of organisations  Identification  Satisfaction  Force index Farm characteristics (farm size, tenancy, plot quality, land-attached investments, sustainable practices, etc)

The Development Impact of Fair Trade Matching ON-CSOFF-CSTotal FT Organic FT Conventional Number of observations on Common Support

The Development Impact of Fair Trade Results bananas (I): Fair Trade vs. Organic n.s00Other crops/non-farm income n.s00Past/future perceptions *-+Organizational Satisfaction n.s00Housing investments n.s00Land investments *-+Risk Acceptance n.s00Female-based decisions **-+Organizational Force **-++Credit Access **-+Durable Assets n.s+-Expenditures n.s00Crop price **-++Crop yield **-+Net Household Income sign non-FT FT Indicator

The Development Impact of Fair Trade Results bananas (II): Fair Trade vs. Conventional (*)+-Other crops/non-farm income n.s00Past/future perceptions *-+Organizational Satisfaction n.s00Housing investments n.s00Land investments **-++Risk Acceptance *-+Male-based decisions *-+Organizational Force **-++Credit Access *-+Durable Assets *-+Expenditures ***-+Crop price n.s+-Crop yield *0+Net Household Income sign non-FT FT Indicator

The Development Impact of Fair Trade FT Premium Community Investments Social Services: Education, Health, Child Care Infrastructure: Roads, Electricity, Water Upgrading: Banana renovation, microcredit

The Development Impact of Fair Trade Summary findings -higher income due to: -household durables + credit access effect -stronger organisation -more risk acceptance higer yield (compared to organic) higher price (compared to conventional)

The Development Impact of Fair Trade Externalities FT market share Regional prices

The Development Impact of Fair Trade Policy Implications Modest direct FT income effects Strong assets & credit-access effect (wealth) Clear behavioral changes (risk, gender, organization) Large externalities (through prices, wages) Limited spillovers FT ownership feelings Strong regional multipliers

Banana market (13,000,000 tonnes) 85,000; 11 years (0,6%) 270,000; 8 years (2,1%) 600,000; 3-5 years (4,6%) 12,130,000 (92,7%) OKÉ Roundtable for Responsible Bananas Fairtrade/organic CSR Without sustainability program The Development Impact of Fair Trade

Outlook & Challenges Mainstreaming FT  FT emphasis not only on prices, more on volume Broadstreaming FT  FT premium generates substantial externalities Deepening FT  Co-ownership & Empowerment Multiplying FT  Local linkages with finance & community organizations

The Development Impact of Fair Trade Thanks for your attention