Gains to French champagne makers from tariff liberalization

Using firm-level survey and export data from 2004 to 2007, we estimate the impact of import tariffs in major non-EU markets on the export performance of the French champagne industry. We use the fractional logit regression to deal with three prominent features of trade data: high frequency of zeros, heteroskedasticity, and endogeneity of the importer size. Controlling for the difference in productivity across firms, the substitution between champagnes and other sparkling wines, and other sources of trade costs, we find that an average champagne exporter would gain 0.6 percent more in export revenue if the import tariff is one percent lower. We also find that tariff liberalization has heterogeneous impacts on firms of different productivity levels.