Middlemen, fair traders, and poverty

We propose a spatial model of producer market access where local middlemen reap market power due to match friction, and fair traders enter to present an alternative. The model features location as a key determinant of the impact of fair trader entry on the market share of fair traders, the distribut...

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Bibliographic Details
Published in:Journal of economic inequality 2016-03, Vol.14 (1), p.81-108
Main Authors: Chau, Nancy H., Goto, Hideaki, Kanbur, Ravi
Format: Article
Language:English
Subjects:
Artisans
Consumers
Developing countries
Development Economics
Economic Growth
Economic models
Economic theory
Economics
Economics and Finance
Equilibrium
Fair trade
Friction
Income inequality
International Economics
International relations
International trade
LDCs
Market shares
Political Science
Poverty
Production capacity
Profits
Public Finance
Studies
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Summary:We propose a spatial model of producer market access where local middlemen reap market power due to match friction, and fair traders enter to present an alternative. The model features location as a key determinant of the impact of fair trader entry on the market share of fair traders, the distribution of consumer willingness to pay between middlemen and producers, and intra- / inter-regional poverty incidence. For governments who wish to minimize the poverty gap, our results support directing resources to subsidize fair trade organizations, and/or to producers with no access to markets, rather than to local middlemen intermediaries.
ISSN:1569-1721
1573-8701
DOI:10.1007/s10888-015-9314-2