When fair trade generates social capital by creating room for manoeuvre for pro-poor policies

Economic interactions are often accused of being neutral, or even of generating adverse effects, not only on the social fabric but also on a factor (social capital) which is regarded as the foundation of both socio-economic activity and prosperity. In this paper we document how a particular form of economic relation has indeed positive effects on a specific type of social capital. Our findings on a sample of Kenyan farmers show that affiliation to Fair Trade of marginalised producers, significantly affect their participation in elections and their trust in trade unions, political parties and the government, net of the impact of other controls and after accounting for the selection bias effect. This implies that consumers buying fair trade products may contribute to reinforce both social cohesion and institutional trust in countries in which these variables are fundamental in creating room for manoeuvre for pro-poor (equity plus growth) policies.