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An Analysis of the Impact of Fair Trade: a Case Study of Tea Producers in the Central Province of Sri Lanka

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An Analysis of the Impact of Fair Trade: a Case Study of Tea Producers in the Central Province of Sri Lanka AN ANALYSIS OF THE IMPACT OF FAIR TRADE: A CASE STUDY OF TEA PRODUCERS IN THE CENTRAL PROVINCE OF SRI LANKA H L HOLMES 2015 AN ANALYSIS OF THE IMPACT OF FAIR TRADE: A CASE STUDY OF TEA PRODUCERS IN THE CENTRAL PROVINCE OF SRI LANKA HANNAH LOUISE HOLMES A Thesis Submitted in partial fulfilment of the requirements of the Manchester Metropolitan University for the Degree of Doctor of Philosophy Department of Accounting, Finance and Economics the Manchester Metropolitan University 2015 This thesis is dedicated to Judith Tomkins for her friendship, words of encouragement and belief in me. Table of Contents Contents Page List of Tables iv List of Figures vi Acknowledgements vii Declaration viii Abbreviations ix Abstract x Chapter One: Introduction 1 1.1 Introduction 1 1.2 The Research Problem 2 1.3 Aims and Objectives 4 1.4 Country Profile 6 1.5 What is Fair Trade? 10 1.6 Chapter Synopsis 22 Chapter Two: Literary Review 27 2.1 Introduction 27 2.2 Overview of Fair Trade Pricing 27 2.3 Trade Models: Free Trade and Comparative Advantage 32 2.4 Disadvantages of Free Trade 34 2.5 Fair Trade as an Alternative Model of Trade 37 2.6 Review of Economic Literature on Fair Trade 42 2.7 Literature Review of the Impact of Fair Trade on GDP 47 2.8 Review of Literature Critiquing Long Run Viability of 49 Fair Trade 2.8.1 Increasing Supply 50 2.8.2 Diversification of Product and Labour 52 2.8.3 Mainstreaming of Fair Trade 54 2.8.4 Satisfying Quality Standards 63 2.8.5 Supply Constraints 66 2.8.6 Increasing Demand 68 2.8.7 Fair Trade and Poverty Alleviation 71 2.8.8 Stakeholder Understanding of the Purpose and 74 Role of Fair Trade 2.9 Gender Issue 75 2.10 Previous Empirical Evidence on the Impact of Fair Trade 75 2.11 Positive Outcomes of Fair Trade 77 2.11.1 Incomes 77 2.11.2 Well-Being 80 2.11.3 Gains for the Broader Market Environment 81 2.11.4 Gains for the Organisational Capacity of Farmers 84 2.12 Challenges for Fair Trade 87 2.12.1 Continuing Inequalities 87 2.12.2 Limited Awareness of Fair Trade within 89 Certified Producer Groups i Contents Page 2.12.3 Issues with Fair-Gate Prices, the Social Premium, 92 and Financing 2.13 Summary Table of Fair Trade Case Studies 95 2.14 Theoretical Framework 102 2.15 Summary 104 Chapter Three: Methodology 105 3.1 Introduction 105 3.2 Sample Selection 106 3.3 Approaches to Questionnaire Design in 111 Impact Studies 3.4 Approaches to Interview Design in Impact Studies 115 3.5 The Analysis Process and Validity Testing of 119 Qualitative Interview Data 3.6 Methodological Approaches to Impact Study Design 120 3.6.1 Using Methodological Approaches within 124 Impact Studies 3.7 Methodological Approach for the Sri Lankan 130 Impact Study 3.7.1 Sample Size Selection 130 3.7.2 Questionnaire Design 132 3.7.3 Questionnaire Structure 133 3.7.4 Interview Design 135 3.8 Data Analysis 137 3.9 Ethical Considerations of Research Design 140 3.10 Summary 140 Chapter Four: Data Results for Gampola District Analysis 141 4.1 Introduction 141 4.2 Descriptive Statistics 142 4.2.1 Fair Trade Producers 142 4.2.2 Conventional Trade Producers 144 4.3 Water and Electricity 146 4.4 Assessment of Normality 148 4.5 Data Results 154 4.6 Income Indicators 154 4.6.1 Fair Trade Involvement and Income Impact 156 4.6.2 Producers’ Perceptions of Income Improvement 159 4.6.3 Income Sufficiency Perceptions 163 4.6.4 Relationship Between Hours Worked and Income 165 4.7 Relationship Between Fair Trade and Hours Worked 168 4.8 Fair Trade and Second Income 170 4.8.1 Hours Worked and Second Income 172 4.9 Excess Money 174 4.10 Standard Multiple Regression of LogTeaIncome 176 4.11 Analysis of Findings: Local Development and 184 Social Premium Indicators 4.11.1 Local Development Awareness 186 4.12 Analysis of Non-Monetary Gains from Fair Trade 188 ii Contents Page 4.12.1 Household Development 189 4.13 Education Indicators 191 4.14 Producer Educational Standards 193 4.15 Relationship Between Fair Trade and Age 196 4.16 Relationship Between Age of Producer and 198 Child Educational Level 4.17 Relationship Between Income and Child 200 Educational Level 4.18 Fair Trade and Children’s Educational Level 202 4.19 Summary Logistic Regressions 205 4.19.1 Logistic Regression: Improved Income from Tea 206 4.19.2 Logistic Regression: Household Development 210 4.20 Summary of Statistic Tests 216 4.21 Summary 219 Chapter Five: Discussion and Policy Recommendations 220 5.1 Introduction 220 5.2 Monetary Impacts 220 5.3 Non-Direct Monetary Impacts 232 5.3.1 Awareness of Local Development 232 5.4 Household Development 235 5.4.1 Educational Gains 235 5.5 Issues Associated with Cooperatives 237 5.6 Summary of Findings and Policy Implications 242 5.6.1 Income Protection and Uncertainty Reduction 243 5.6.2 Welfare Benefits 244 5.7 Focus Areas for SOFA and Fair Trade to Consider 244 5.7.1 Focus Areas for SOFA 245 5.7.2 Focus Areas for Fair Trade: Lessons from SOFA 247 5.8 Summary of Findings 250 5.9 Summary 251 Chapter Six: Conclusion 253 6.1 Introduction 253 6.2 Contribution to the Existing Literature 263 6.3 Limitations of the Study 264 6.4 Further Research 264 Bibliography 266 Appendix 280 Appendix 1: Questionnaire for Fair Trade Affiliated 280 Producers/landowners Appendix 2: Questionnaire for Conventional Trade 291 Affiliated and/or Organic Producers/Landowners Appendix 3: De Vaus (2002) Question Wording Checklist 305 Appendix 4: Interview Questions for Gampola Study 306 iii List of Tables Table: Page 1.1 Average household per capita income per month by 9 province 2012/13 2.1 Summary of Fair Trade Studies 95 3.1 Methods Employed in Previous Impact Studies 128 4.1 Summary of Sample Data 147 4.2 Tests of Normality of Original Data 149 4.3 Tests for Normality on Transformed Data 149 4.4 Assessment of Normality 150 4.5 Group Statistics of Independent Samples Test 157 on Fairtrade and LogTeaIncome 4.6 Results of Independent Samples Test on Fairtrade and 157 LogTeaIncome 4.7 Strength of Effect Size Statistics 158 4.8 Crosstabulation of ImprovedIncome and Fairtrade 161 4.9 Results of Chi-square Test for Independence on 162 ImprovedIncome and Fairtrade 4.10 Effect Size Statistics of Chi-square Test for Independence 162 on ImprovedIncome and Fairtrade 4.11 Crosstabulation of Fairtrade and Incomesufficienct 164 4.12 Descriptive Statistics for HoursWorked and LogTeaIncome 166 4.13 Correlation Coefficient for HoursWorked and LogTeaIncome 167 4.14 Median Results for Mann-Whitney U Test on Hoursworked 168 and Fairtrade 4.15 Results from Mann-Whitney U Test on 169 Hoursworked and Fairtrade 4.16 Crosstabulation of Fairtrade and Secincome 171 4.17 Median results from Mann-Whitney U Test on 172 Hoursworked and Secincome Variables 4.18 Results of Mann-Whitney U Test on Hoursworked 173 and Secincome 4.19 Crosstabulation of Fairtrade and Excessmoney Variables 175 4.20 Chi-square Test Results 176 4.21 Correlation Coefficients 178 4.22 Table of Coefficients to Determine the 179 Existence of Multicollinearity 4.23 Standard Multiple Regression 181 4.24 Standard Multiple Regression Model Summary 181 4.25 Table Evaluating Each of the Independent Variables 184 4.26 Crosstabulation of Fairtrade and DevelopAware 187 4.27 Chi-square Test Results 188 4.28 Crosstabulation of Fairtrade and HouseholdDev Variables 190 4.29 Chi-square Test Results 191 4.30 Crosstabulation of Fairtrade and Educ Variables 194 4.31 Chi-square Test Results 195 4.32 Group Statistics for Age and Fairtrade Participation 196 4.33 Independent Sample T-test Results 197 iv Table: Page 4.34 Group Statistic Results for ChildEduc 199 4.35 Independent Samples T-test for Age and 199 Standard of ChildEduc 4.36 Income and Producer’s Children Educational Statistics 201 4.37 Independent Samples T-test for LogTeaIncome 202 and Standard of ChildEduc 4.38 Crosstabulation of Fairtrade and ChildEduc Variables 204 4.39 Chi-square Test for Fairtrade and ChildEduc Achievement 205 4.40 Classification Table from Logistic Regression 206 on ImprovedIncome 4.41 Omnibus Test of Model Coefficients 207 4.42 Hosmer and Lemeshow Test 208 4.43 Model Summary for ImprovedIncome Logistic Regression 208 4.44 Classification Table for Logistic Regression on 209 ImprovedIncome 4.45 Logistic Regression on ImprovedIncome from Tea 209 4.46 Classification Table from Logistic Regression 211 on HouseholdDev 4.47 Omnibus Test of Model Coefficients 212 4.48 Hosmer and Lemeshow Test 212 4.49 Model Summary for HouseholdDev Logistic Regression 213 4.50 Classification Table for Logistic Regression on HouseholdDev 214 4.51 Logistical Regression on HouseholdDev 214 4.52 Summary Table of Statistical Tests 216 v List of Figures Figure: Page 2.1 Theoretical Framework 103 4.1 Age of Farmers 152 4.2 Income from Tea Production 152 4.3 Number of Children 153 4.4 Hours Worked Per Day on Tea Production 153 4.5 Scatterplot of HoursWorked and LogTeaIncome 166 4.6 Scatterplot of the Standardised Residuals 180 4.7 Normal Probability Plot 182 vi Acknowledgements I would like to express my profound appreciation to the supervisory team Dr. Kevin Albertson, Dr. Emmanuel Cleeve, Professor Chris Pyke and Ms. Judith Tomkins of the Department of Accounting, Finance and Economics, Manchester Metropolitan University for their unfailing help and encouragement.
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