The impact of Fair Trade on banana producers in northern Peru

Abstract

This study provides one of the first detailed analyses of the impact of Fair Trade (FT) banana certification at the household level. With a careful selection of treatment and control farmers (through their associations) and the use of a propensity score matching technique, we were able to construct an appropriate counterfactual for the situation of FT farmers prior to their involvement in this supply chain. Due to the fact that all sales of banana FT in the Chira Valley also have an organic certification, and to be able to distinguish the effects of FT involvement from the effects of participating in the organic market, we compared the outcomes of organic farmers which belong to a FT association with the outcomes of two different types of farmers: (a) organic farmers which belong to an association recently FT certified, and (b) conventional farmers in the same area which do not belong to any association. Our results provide clear evidence of an impact of FT involvement on income and overall welfare indicators for banana farmers in the Chira Valley. These improvements are not only achieved via the better price obtained for FT sales but also because of higher productivity levels obtained as a results of the FT premium investment.