The Fair Trade (FT) coffee initiative attempts to channel charity from consumers to poor producers via increased prices. We show that the rules of the FT system permit this rent to be eliminated due to free entry and costly excess certification of output. Using data from an association of coffee cooperatives in Central America, we verify that expected producer benefits are close to 0 when we take into account the output that is certified but not sold as FT. Our results illustrate how free entry undermines the attempt at extending charity via a price distortion in an otherwise competitive market.

This paper analyzes how electoral incentives affected the performance of a major decentralized conditional cash transfer program intended on reducing school dropout rates among children of poor households in Brazil. We show that while this federal program successfully reduced school dropout by 8 percentage points, the program's impact was 36% larger in municipalities governed by mayors who faced reelection possibilities compared to those with lame-duck mayors. First-term mayors with good program performance were much more likely to be reelected. These mayors adopted program implementation practices that were not only more transparent but also associated with better program outcomes.