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Quality Sorting and Trade: Firm-Level Evidence for French Wine

  • Matthieu Crozet
  • Keith Head
  • Thierry Mayer

Firm-level regressions show that Champagne producers that receive better ratings from wine guides also export to more markets, charge higher prices, and sell more in each market. Our method corrects for a severe selection bias predicted by the model. By using direct measures of quality, we can recover estimates of parameters from a Melitz-based model of heterogeneous firms. We then regress averages of the quality, price, and quantity shipped to a country on measures of its attractiveness and entry costs. Champagne exhibits quality-sorting: more attractive markets tend to have lower average qualities and prices, but higher quantities.

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Paper provided by CEPII research center in its series Working Papers with number 2009-14.

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Date of creation: Jul 2009
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Handle: RePEc:cii:cepidt:2009-14
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  1. Lawless, Martina & Whelan, Karl, 2007. "A Note on Trade Costs and Distance," MPRA Paper 5804, University Library of Munich, Germany.
  2. E. Baldwin, Richard & Ito, Tadashi, 2011. "Quality Competition Versus Price Competition Goods: An Empirical Classification," Journal of Economic Integration, Center for Economic Integration, Sejong University, vol. 26, pages 110-135.
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  8. Verhoogen, Eric A, 2007. "Trade, Quality Upgrading and Wage Inequality in the Mexican Manufacturing Sector," CEPR Discussion Papers 6385, C.E.P.R. Discussion Papers.
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  16. Hallak, Juan Carlos & Sivadasan, Jagadeesh, 2008. "Productivity, quality and exporting behavior under minimum quality constraints," MPRA Paper 24146, University Library of Munich, Germany.
  17. David Hummels & Peter J. Klenow, 2005. "The Variety and Quality of a Nation's Exports," American Economic Review, American Economic Association, vol. 95(3), pages 704-723, June.
  18. Yeaple, Stephen & Helpman, Elhanan & Melitz, Marc, 2004. "Export versus FDI with Heterogeneous Firms," Scholarly Articles 3229098, Harvard University Department of Economics.
  19. Peter K. Schott, 2004. "Across-product Versus Within-product Specialization in International Trade," The Quarterly Journal of Economics, MIT Press, vol. 119(2), pages 646-677, May.
  20. David Hummels & Alexandre Skiba, 2002. "Shipping the Good Apples Out? An Empirical Confirmation of the Alchian-Allen Conjecture," NBER Working Papers 9023, National Bureau of Economic Research, Inc.
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  23. Johnson, Robert C., 2012. "Trade and prices with heterogeneous firms," Journal of International Economics, Elsevier, vol. 86(1), pages 43-56.
  24. Hallak, Juan Carlos, 2006. "Product quality and the direction of trade," Journal of International Economics, Elsevier, vol. 68(1), pages 238-265, January.
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