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.

The world’s poor are seeing a rapid expansion in access to formal savings accounts. What is the source of savings when households are connected to a formal account? We combine a high-frequency panel survey spanning two and a half years with an experiment in which a Sri Lankan bank used mobile Point-of-Service (POS) terminals to collect deposits directly from households each week. We find that the headwaters of formal savings lie in sacrificed leisure time: households work more, and improved savings options generate an increase in labour effort in both self-employment and in the wage market. The results suggest that the labour allocation channel is an important mechanism linking savings opportunities to income.

We formalize the optimal design of experiments when there is interference between units, i.e. an individual's outcome depends on the outcomes of others in her group. We focus on randomized saturation designs, two-stage experiments that first randomize treatment saturation of a group, then individual treatment assignment. We map the potential outcomes framework with partial interference to a regression model with clustered errors, calculate standard errors of randomized saturation designs, and derive analytical insights about the optimal design. We show that the power to detect average treatment effects declines precisely with the ability to identify novel treatment and spillover effects.