Development Projects and Life Satisfaction: An Impact Study on Fair Trade Handicraft Producers

Is there a correspondence between subjective and objective wellbeing indicators in development programs? We investigate this question by evaluating the impact of Fair Trade affiliation on the subjective wellbeing of a sample of Peruvian (treatment and control) producers from two different Fair Trade projects in two socioeconomic environments, one relatively poorer (Juliaca) and the other relatively more affluent (Chulucanas). We find a direct and an indirect effect. The direct effect acts positively via affiliation years in the poorer project and via trade diversification in both projects. The indirect effect acts through the reduction of poverty and relative income. Consistently with the concave income-happiness assumption, the variables generating the indirect effect have a much weaker impact for producers living in the relatively better-off socioeconomic environment, net of the lower FT economic impact in this area.