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| Title: | QUALITY SORTING AND TRADE: FIRM-LEVEL EVIDENCE FOR FRENCH WINE |
| Authors: | Crozet, Matthieu
Head, Keith
Mayer, Thierry |
| Authors (Email): | Crozet, Matthieu (matthieu.crozet@cepii.fr)
Head, Keith (keith.head@sauder.ubc.ca)
Mayer, Thierry (tmayer@univ-paris1.fr) |
| JEL Codes: | F12 |
| Issue Date: | 2009-07 |
| Series/Report no.: | AAWE Working Paper
40 |
| Abstract: | Quality sorting and trade: Firm-level evidence for French wine Investigations of the
effect of quality differences on heterogeneous performance in exporting have been
limited by lack of direct measures of quality. We examine exports of French wine,
matching the exporting firms to producer ratings from two wine guides. We show that
high quality producers export to more markets, charge higher prices, and sell more in
each market. More attractive markets are served by exporters that, on average, make
lower rated Champagne. Market attractiveness has a weakly negative effect on prices and
a strongly positive effect on quantities, confirming the sign predictions of a simple
quality sorting model.
Methodologically, we make several contributions to the literature. First, we propose an
estimation method for regressions of firm-level exports on ability measures and use
Monte Carlo simulations to show that it corrects a severe selection bias present in OLS
estimates. Second, we show how the means of quality, price, and quantity for exporters to
a given market can be used to recover estimates of core parameters (which we compare
with firm-level estimates) and discriminate between productivity and quality-sorting
versions of the Melitz model. Our new method regresses country means on an index of
each country's attractiveness and the fixed costs of entering it. We compare our method,
which utilizes explanatory variables estimated in the firm-level regressions, to the
conventional approach that relies on a reduced-form relationship with proxies for
attractiveness and fixed costs. |
| URI: | http://purl.umn.edu/53883 |
| Institution/Association: | American Association of Wine Economists>Working Papers |
| Total Pages: | 39 |
| From Page: | 1 |
| To Page: | 39 |
| Collections: | Working Papers
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| AAWE_WP40.pdf | | 322Kb | PDF | View/Open |
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