Ulrich Morawetz and Brian Ssebunya
Coffee with “Fair Trade” or “Organic” labels is well known to all coffee drinkers. The discussion whether the labels can achieve their intended goals has been surveyed in leading economic journals (Dragusanu, Giovannucci, and Nunn 2014; Dammert and Mohan 2014). The results with regard to the coffee certification on income are diverse and contradicting (Jena et al. 2012; Lampach and Morawetz 2016; Karki, Jena, and Grote 2016; Akoyi and Maertens 2018; Arnould, Plastina, and Ball 2009; Bolwig, Gibbon, and Jones 2009; Ruben and Fort 2012).
We confirm this finding in our new article and add new explanation why results are so diverse (Ssebunya et al., in press): we study six different coffee farmer groups in two cooperatives in Uganda. Two of the groups are “Fair Trade” and “Organic” certified, two groups are only “Fair Trade” certified and two groups are not certified. But our groups do not just differ with respect to certification: they also differ with respect to the regions where they are located, in the degree of vertical market integration, and probably many group-specific arrangements which we are not aware of. Even though we have 362 detailed farm level observations, this heterogeneity of groups makes it impossible to infer the causal effect of certification. We stress this point in our article.
In the econometric analysis of our article we focus on one aspect which has not received a lot of attention so far: for a farmer to be certified, it is necessary to be member of a farmer group. But being member of a farmer group -- certified or not --, may influence income. We therefore estimate the effect of certification conditional on group membership duration. We do so using the so-called “sequential g-estimation” as conventional conditioning (including an additional control variable) may induce a bias (Acharya, Blackwell, and Sen 2016). For the long standing farmer groups we find that 20 percentage points differences in net-farm income between certified an non-certified farmers are explained by membership duration.
Our research confirmed that a detailed understanding of the production and processing is necessary to identify the effects of coffee certification on income. While most studies survey (many) farmers within a farmer group (which does not allow to identify group specific effects), surveying farmers from many different farmer groups (more than our six farmer groups) and collecting farmer group characteristics might help to identify a causal effect of certification. Finally, for effects which vary within farmer groups (e.g. premiums, prices, investments) our approach of conditional effects might be used to shed light on impact pathways of certification even when having data from a few farmer groups only.
The following link leads to a free version of our article:
by Brian Robert Ssebunya, Ulrich B Morawetz, Christian Schader, Matthias Stolze, Erwin Schmid; Group membership and certification effects on incomes of coffee farmers in Uganda, European Review of Agricultural Economics, https://doi.org/10.1093/erae/jby022
Abstract: Discrepancies in certification effects on smallholder incomes have been found in scientific literature. Unobserved farmer-group heterogeneity is a likely reason. For the long-standing Robusta coffee farmer-groups in Uganda, we find no significant effect of certification on net-farm income. But, we find 20 percentage point differences in net-farm income between certified and non-certified farmers explained by membership duration. In contrast, the recently founded certified Arabica coffee farmer-groups have positive net-farm income effects of 151 per cent, partly explained by a higher degree of vertical integration. With or without certification, long-standing group membership is found to have positive income effects.
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Lampach, Nicolas, and Ulrich B. Morawetz. 2016. ‘Credibility of Propensity Score Matching Estimates. An Example from Fair Trade Certification of Coffee Producers’. Applied Economics 48 (44): 4227–37. doi.org/10.1080/00036846.2016.1153795.
Ruben, Ruerd, and Ricardo Fort. 2012. ‘The Impact of Fair Trade Certification for Coffee Farmers in Peru’. World Development 40 (3): 570–82. doi.org/10.1016/j.worlddev.2011.07.030.
Ssebunya, Brian Robert, Ulrich B. Morawetz, Christian Schader, Matthias Stolze, and Erwin Schmid. in press. ‘Group Membership and Certification Effects on Incomes of Coffee Farmers in Uganda’. European Review of Agricultural Economics. doi.org/10.1093/erae/jby022.