DP7459 Middlemen, Non-Profits and Poverty

Author(s): Nancy H Chau, Hideaki Goto, Ravi Kanbur
Publication Date: September 2009
Keyword(s): market access, middlemen, non-profits, poverty
JEL(s): F15, I32
Programme Areas: Development Economics
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=7459

In many markets in developing countries, especially in remote areas, middlemen are thought to earn excessive profits. Non-profits come in to counter what is seen as middlemen's market power, and rich country consumers pay a 'fair-trade' premium for products marketed by such non-profits. This paper provides answers to the following five questions. How exactly do middlemen and non-profits divide up the market? How do the price mark up and price pass-through differ between middleman and non-profits? What is the impact of non-profits entry on the wellbeing of the poor? Should the government subsidize the entry of non-profits, or the entry of middlemen? Should wealthy consumers in the North pay a premium for fair trade products, or should they support fair trade non-profits directly?