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Development Uncorked: Reputation Acquisition in the New Market for Chilean Wines in the UK

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  • Macchiavello, Rocco

Abstract

This paper studies learning effects in new markets using a panel of relationships between Chilean wineries and distributors in the UK. Controlling for winery, distributors and time effects, FOB prices increase by at least three percent with every additional year in a relationship while export volumes do not drop. The implied shift in demand is not explained by improvements in product quality, or by distributor, product and match-specific effects. FOB prices responses to relationship specific exogenous changes in marketing costs induced by exchange rates dynamics suggest that wineries bargaining power increases over time. Following their first relationship in the market, wineries are re-matched to distributors of higher quality. The evidence suggests that learning about wineries is an important determinant of the positive age effects on FOB prices but also that learning takes considerably long time. Policy implications are discussed.

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Bibliographic Info

Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 7698.

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Date of creation: Feb 2010
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Handle: RePEc:cpr:ceprdp:7698

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Related research

Keywords: intermediation; learning; reputation; trade costs;

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References

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  1. Gita Gopinath & Oleg Itskhoki & Roberto Rigobon, 2010. "Currency Choice and Exchange Rate Pass-Through," American Economic Review, American Economic Association, vol. 100(1), pages 304-36, March.
  2. Hausmann, Ricardo & Rodrik, Dani, 2002. "Economic Development as Self Discovery," CEPR Discussion Papers 3356, C.E.P.R. Discussion Papers.
  3. Crozet, Matthieu & Head, Keith & Mayer, Thierry, 2009. "Quality sorting and trade: Firm-level evidence for French wine," CEPR Discussion Papers 7295, C.E.P.R. Discussion Papers.
  4. Egan, Mary Lou & Mody, Ashoka, 1992. "Buyer-seller links in export development," World Development, Elsevier, vol. 20(3), pages 321-334, March.
  5. Pol Antràs, 2003. "Firms, Contracts, and Trade Structure," NBER Working Papers 9740, National Bureau of Economic Research, Inc.
  6. Jonathan Eaton & Marcela Eslava & Maurice Kugler & James Tybout, 2008. "Export Dynamics in Colombia: Transactions Level Evidence," BORRADORES DE ECONOMIA 004748, BANCO DE LA REPÚBLICA.
  7. Andrabi, Tahir & Ghatak, Maitreesh & Khwaja, Asim Ijaz, 2006. "Subcontractors for tractors: Theory and evidence on flexible specialization, supplier selection, and contracting," Journal of Development Economics, Elsevier, vol. 79(2), pages 273-302, April.
  8. Freund, Caroline & Pierola, Martha Denisse, 2010. "Export entrepreneurs : evidence from Peru," Policy Research Working Paper Series 5407, The World Bank.
  9. John McMillan & Christopher Woodruff, 1999. "Interfirm Relationships And Informal Credit In Vietnam," The Quarterly Journal of Economics, MIT Press, vol. 114(4), pages 1285-1320, November.
  10. Rachel Kranton & Anand V. Swamy, 2008. "Contracts, Hold-Up, and Exports: Textiles and Opium in Colonial India," American Economic Review, American Economic Association, vol. 98(3), pages 967-89, June.
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Citations

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Cited by:
  1. Rodrigo Wagner & Andrés Zahler, 2011. "New Exports from Emerging Markets:Do Followers Beneit from Pioneers ?," Working Papers 18, Facultad de Economía y Empresa, Universidad Diego Portales.
  2. Pranab Bardhan & Dilip Mookherjee & Masatoshi Tsumagari, 2013. "Middlemen Margins and Globalization," American Economic Journal: Microeconomics, American Economic Association, vol. 5(4), pages 81-119, November.
  3. Macchiavello, Rocco & Morjaria, Ameet, 2013. "The Value of Relationships: Evidence from a Supply Shock to Kenyan Rose Exports," CEPR Discussion Papers 9531, C.E.P.R. Discussion Papers.
  4. Kunal Dasgupta & Jordi Mondria, 2012. "Quality Uncertainty and Intermediation in International Trade," Working Papers tecipa-462, University of Toronto, Department of Economics.
  5. Antràs, Pol & Foley, C. Fritz, 2011. "Poultry in Motion: A Study of International Trade Finance Practices," CEPR Discussion Papers 8422, C.E.P.R. Discussion Papers.

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