the impact of fair trade for poor farmers ruerd ruben centre for international development issues...

THE IMPACT OF FAIR TRADEFOR 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


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 900.000 families


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


Difference – in – Difference

Pre - treatment

A: treatment state

B: No - treatment state

C: treatment state

E: Situation bef ore program

F: situation before program

Post - treatment

D: No - treatment state

Treatment Group

Comparison Group


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


Sample

• Bananas in Northern Peru (N = 200)

- Organic FT

- Organic non-FT

- Conventional non-FT


Field Sites in Peru

Bananas in Piura

(Valle de Chira)

http://www.repebancjperu.org/actividades/logos/grupo_hualtaco.gif


Data

• Farm-household characteristics

• banana production (yield, prices)

• Other (non)agricultural activities

• Expenditure system (consumption)

• Wealth (assets), savings & investments

• Farmers’ Organisation

• Sustainable practices


Attitudes & Perceptions

• Past & Future life perspectives

• Organizational identification

• Organizational strength

• Organizational satisfaction

• Gender decision domains (male / female / joint)

• Willingness to invest

• Risk perceptions


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 organisationsIdentificationSatisfactionForce index

Farm characteristics(farm size, tenancy, plot quality, land-attached investments, sustainable practices, etc)


Matching

0.5

11.

52

2.5

Den

sity

0 .2 .4 .6 .8 1Propensity Score

ControlTreated

Before Matching

0.5

11.

52

Den

sity

0 .2 .4 .6 .8Propensity Score

ControlTreated

After Matching

ON-CS • OFF-CS• TotalFT 42 6 48Organic 97 6 103FT 39 9 48Conventional 30 6 36

Number of observations on Common Support


Results bananas (I): Fair Trade vs. Organic

n.s00Other crops/non-farm income

n.s00Past/future perceptions

*-+Organizational Satisfaction

n.s00Housing investmentsn.s00Land investments

*-+Risk Acceptancen.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


Results bananas (II): Fair Trade vs. Conventional

(*)+-Other crops/non-farm income

n.s00Past/future perceptions

*-+Organizational Satisfaction

n.s00Housing investmentsn.s00Land investments

**-++Risk Acceptance*-+Male-based decisions

*- +Organizational Force

**-++Credit Access*-+Durable Assets

*-+Expenditures

***-+Crop pricen.s+-Crop yield*0+Net Household Income

sign non-FT FT Indicator


FT Premium

• Community Investments

• Social Services: Education, Health, Child Care

• Infrastructure: Roads, Electricity, Water

• Upgrading: Banana renovation, microcredit


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)


Externalities

0

10

20

30

40

50

60

7019

97

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

FT market share

Regional prices


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



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


Thanks for your attention

the impact of fair trade for poor farmers ruerd ruben centre for international development issues...

Documents

fair trade fruit

organic ftorganic

countriesft treatment

treatment statee

treatment stateb

treatment statec

female decision domains

common supportresults