On the economics of eco-labelling: a case study for fair trade coffee in the UK

  • Ibon Galarraga Gallastegui

Student thesis: Doctoral ThesisPhD


This thesis deals with economic tools for the analysis of eco-labelling and its effects on the market. We, first, present an extensive revision of the literature, summarising the discussion in the different organisations of the international fora, and identifying the main areas of research.

Second, we revise and apply the hedonic method to study the demand for fair trade/organic coffee, estimating that, ceteris paribus, the presence of the 'green' characteristic will increase the price of an average grade of coffee by 11.26%. This information is combined with the Quantity Based Demand System (QBDS) model – later compared with the Almost Ideal Demand System (AIDS) – to calculate the own and cross demand elasticities. The results show that the demand for fair trade/organic coffee is more sensitive to changes in prices than the demand for regular coffee or tea, i.e. the own price elasticity of demand is higher. Hence, any demand side policy is expected to have a greater impact on the demand for fair trade/organic coffee than on the demand for regular coffee and tea. The AIDS model is later applied to the tyre market in Hungary.

Third, a theoretical framework for the study of the effect that labelling schemes have on the supply side of the market is introduced. Additionally, some interesting information on fair trade coffee supply is presented.

Finally, the thesis provides a technique to analyse the effects and outcomes of different economic policies, such as taxes or subsidies. The technique is applied to a policy designed to promote fair trade/organic coffee; a subsidy for the production of fair trade/organic coffee in producing countries that is financed by small taxes on regular coffee and tea consumption in the UK. The technique is further tested on the case of the tyre market in Hungary.

Date of Award7 Dec 2001
Original languageEnglish
Awarding Institution
  • University of Bath
SupervisorAdrian Winnett (Supervisor) & A Markandya (Supervisor)

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