49 mill/exporters have mark-down measures, on average and _ceteris paribus_ , some 20 US cents/kg lower than the control group of domestically owned, single plant noncooperative firms.

The Costa Rican regulatory system is costly in its reliance on annual studies and extensive contract registration and producer price calculation procedures. It could be argued that if information is essentially at the heart of the exercise of market power and the mark-down of producer prices, then perhaps legislative resources are better spent in providing greater market information to producers and promoting their mobility for harvest sales. On the other hand, the paper does not (and cannot) inform on producer price mark-down behavior in the absence of Law 2762 altogether. What is certain is that, whether to check market power or to prevent the subsidization of inefficient mills by producers, better contract price information to limit the markdown on producers would improve the effectiveness of Costa Rica’s coffee policy.

# _Policy Implications for Fairtrade_

What is the role of Fairtrade in overcoming the market factors limiting producer returns in internationally traded commodities like coffee? The results of the previous section inform on the key research question in two important ways: First, until now, in the absence of empirical evidence, it has been difficult to assess, on non-ideological grounds, the effectiveness of Fairtrade support for cooperatives. Using the information theoretic approach as a starting point, Fairtrade support for cooperatives as a policy is effective only if doing so corrects for the underlying causes of the problem of low shares for producers in commodity markets. Specifically, Fairtrade intervention with cooperatives in the coffee market is partly aimed to mitigate market power. Since it is argued above that, by definition, cooperatives do not exercise market power, the only way to assess the Fairtrade role in mitigating market power is to ascertain if there is any evidence that market power exists at all. If there is no evidence for market power in the market, then (unless it is maintained that Fairtrade corrected for market power in the national market as a whole) this conclusion could not be drawn. The provision of qualified evidence for the exercise of market power in Costa Rica justifies the Fairtrade intervention on the grounds of market power. Since a Fairtrade mill is by definition a cooperative mill, and it is relative to cooperatives that market power has been identified, a stronger statement may be tautological. What is clear is that smallholder coffee farmers face market power at the farm-gate, _even in socially protective Costa Rica_ . It is this that permits a generalization of the results to commodity producers in countries with weaker (cooperative and legislative) contexts than Costa Rica. The extent to which cooperatives are operating accountably (and in countries with a weaker solidarity context, this is partly endogenous to Fairtrade efforts) determines the extent to which Fairtrade is effective in tackling one of the problems underlying poor returns for producers.

The second important result concerns the identification of a statistically significant ‘Fairtrade effect’, separate from the cooperative effect. The fixed effects coefficient for Fairtrade mills estimated provides evidence that, _ceteris paribus_ and on average, the mark-downs associated with Fairtrade mills are smaller than those of domestically-owned, single-plant mills, including other cooperatives. That is, there is a separate Fairtrade effect. On the maintained assumption that cooperatives cannot cheat themselves, and Fairtrade mills are cooperatives, one interpretation of this result is that Fairtrade support for cooperatives in Costa Rica results in an improvement in