Middlemen, fair traders, and poverty

We propose a spatial model of producer market access where local middlemen reap market power due to match friction, and fair traders enter to present an alternative. The model features location as a key determinant of the impact of fair trader entry on the market share of fair traders, the distribution of consumer willingness to pay between middlemen and producers, and intra- / inter-regional poverty incidence. For governments who wish to minimize the poverty gap, our results support directing resources to subsidize fair trade organizations, and/or to producers with no access to markets, rather than to local middlemen intermediaries.