Fair Trade and Wellbeing Improvements: Evidence from Sri Lanka

Abstract

This paper investigates whether and how Fair Trade certification improves the wellbeing of small-scale producers by drawing upon a field study carried out by the authors in 2009 in the Central Province of Sri Lanka. A point of departure from earlier studies is to use a mixed methods approach, combining qualitative and quantitative data to assess the impact of Fair Trade on a broader set of development indicators to capture both the monetary and non-monetary progress of farmers. Methodologically, to overcome the limitation of small sample sizes of non-experimental survey data, we propose the use of propensity-score weighted linear and non-linear regression models with and without instrumenting the farmers’ participation in Fair Trade. Here we have made treatment and control groups observationally comparable by applying propensity score matching (PSM) to match and weight the data, following Hirano and Imbens. We have found that Fair Trade certification increased farmers’ actual income from tea production significantly, with fewer hours of work per day and accelerated perceived improvement in overall household income, as well as empowering women in decision making. Our mixed methods approach led us to conclude that Fair Trade certification benefits Fair Trade tea farmers through increased tea income and risk reduction.