The Impact of Social Capital on the Implicit Price Paid by the Italian Consumer for Fair Trade Coffee

Abstract

Consumers in developed countries are increasingly interested in the consumption of food products incorporating ethical aspects, particularly fair trade products. These products are usually distributed in a network of World Shops and, more recently, in supermarkets and shopping centres. The fair trade product with the highest market share is coffee. This study aims to ascertain the implicit price paid by Italian consumers for the fair trade content of coffee and how this implicit price is influenced by the level of social capital of the territory where consumers live. The data utilised are scanner data, based on the purchase at supermarkets and shopping centres observed from 2005 to 2007, referred to a territorial unit that is the province. Since scanner data are used, the analysis can allow for the coffee attributes described by the labels: branded, organic, decaffeinated, fair trade, espresso, and so on. The approach followed is the application of an hedonic regression where the dependant variable is the coffee price while the regressors are coffee characteristics (fair trade content and coffee other attributes) and several indicators of provincial social capital, alternatively included.