| dc.description.abstracteng | Sustainability standards such as Fairtrade, UTZ, and Rainforest Alliance have recently gained importance in global value chains, with some of the major tropical commodities seeing significant increases in the share of their certified area in the last ten years. This trend is directly related to consumers in North America and Europe becoming increasingly aware of the importance of sustainable agricultural production. These consumers are concerned not only about food safety issues; they also want to support a kind of agricultural production that reduces negative environmental impacts due to the use of certain agricultural practices while improving the livelihoods of rural populations in developing countries. Increasing consumer awareness about sustainability issues fosters demand for products that can ensure that particular concerns are being addressed along the value chains. Sustainability standards are usually regarded as an effective mechanism to do so. Against this background, products certified under sustainability standards have moved from niche to mainstream markets.
Despite differences in their requirements and the extent to which they focus on socioeconomic and environmental goals, all major sustainability standards claim that they are beneficial to smallholder farmers and workers. These benefits can be in terms of better income, access to more secure markets and credit, improvements in food and nutrition security, reduction of child labor, among others. A growing body of literature has sought to evaluate the extent to which the claims from standards-setting bodies hold, but the results are mixed. This literature is already quite comprehensive in terms of the standards, countries, crops, and outcome variables covered, but there are still several shortcomings in terms of methodologies and empirical approaches used.
Previous studies relied on data from only a few purposively selected cooperatives, which reduces the external validity of these studies. Certification in the small farm sector typically takes place through group approaches to reduce the high transaction costs that would otherwise be prohibitive for individual farmers. Therefore, one would expect that the benefits drawn from group membership and the benefits from being certified are closely correlated. In this dissertation, I analyze the effects of sustainability standards (with a particular focus on Fairtrade) on economic, social, and environmental indicators using a sampling design that better accounts for the institutional heterogeneity in agricultural cooperatives. This sampling design allows to control for some important confounding factors at the cooperative level and, due to the large institutional heterogeneity captured in the data, present results that have greater external validity. The three articles presented here are based on primary data from 1,000 certified and non-certified farmers and rural workers randomly sampled from 50 cocoa cooperatives in Côte d’Ivoire. I focus in particular on Fairtrade certification because, contrary to other sustainability standards, Fairtrade gives special emphasis to agricultural cooperatives.
In the first article, I analyze whether farmers benefit from Fairtrade certification also when accounting for cooperative effects. Furthermore, I discuss the importance of using a sampling design that sufficiently accounts for institutional heterogeneity in agricultural cooperatives. Using regression models with instrumental variables, I show that Fairtrade certification has a positive and significant effect on yields, prices and living standards of farmers. These results are robust to alternative model specifications in which I additionally control for some key cooperative characteristics. However, the magnitude of the estimates changes, with substantial differences in the effects on yields. These results show that Fairtrade is beneficial to farmers even after controlling for cooperative effects. I also conclude that not accounting for institutional heterogeneity leads to omitted variable bias, which underlines that institutional characteristics matter and that such heterogeneity deserves more explicit focus in the design of future studies.
In the second article, I focus on the effects of Fairtrade certification on the environmental impacts of agricultural production and the health of farmers and workers. Certification can lead to some important changes in agricultural practices, especially concerning chemical input use. Contrary to previous studies that focused only on the intensity of agrochemical input use, I use two measures of aggregated pesticide toxicity – namely the Environmental Impact Quotient (EIQ) and the Hazard Quotient (HQ) – to proxy potential impacts on the environment and health. In the empirical analyses, I use double-hurdle regression models to estimate the effect of Fairtrade on agrochemical input use and aggregated toxicity, and Poisson regression models to estimate effects on the incidence of acute pesticide-related health symptoms. Instrumental variables are employed to reduce potential endogeneity issues. Fairtrade increases chemical input quantities and aggregated levels of toxicity. Nevertheless, Fairtrade reduces the incidence of pesticide-related acute health symptoms among farmers and workers.
In the third article I explore how cooperatives use the Fairtrade social premium – a sum that is paid to cooperatives in addition to the agreed price to be used in projects to strengthen the cooperative and to benefit the community in the villages more broadly. I use descriptive statistics to discuss the communities’ main social needs as voiced by survey respondents and to analyze in what kind of projects the social premium is actually invested. Using principal component analysis (PCA), I analyze which kinds of cooperatives are more likely to invest in what kinds of projects. I find that larger investments in projects related to education, water, and other community infrastructure are correlated with cooperative characteristics like the number of assets owned and the number of years that the cooperative has been certified. To illustrate the potential benefits of the social premium to the local community, I use regression analysis to evaluate if (i) being certified and (ii) living in a village where an education project was financed through the social premium have effects on household education expenditures. I find evidence that being certified has a positive effect on household education expenditures among farmers and cooperative workers. However, living in a village where an educational project was implemented has a positive effect only among farmers.
Two main findings of this dissertation should be highlighted. First, I find evidence that sustainability standards have positive effects in the small farm sector, even when taking cooperative effects into account. Second, heterogeneity among agricultural should be more explicitly taken into account in future studies focusing on the effects of certification. Sustainability standards have the potential to engender changes in agrifood systems to make them more sustainable. However, local stakeholders (e.g. development agencies, non-governmental organizations, extension agencies) should provide support to cooperatives to help them first meet the requirements for certification and then reap the benefits in a profitable manner. Furthermore, state-led initiatives should ensure the existence of a well-functioning institutional environment that builds synergies between private and public-led programs that foster the adoption of more sustainable farming and business practices. | de |