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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
Date of revision:
Handle: RePEc:cii:cepidt:2009-14
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  1. Bernard, Andrew B. & Bradford Jensen, J., 1999. "Exceptional exporter performance: cause, effect, or both?," Journal of International Economics, Elsevier, vol. 47(1), pages 1-25, February.
  2. Kugler, Maurice & Verhoogen, Eric, 2009. "The Quality-Complementarity Hypothesis: Theory and Evidence from Colombia," IZA Discussion Papers 3932, Institute for the Study of Labor (IZA).
  3. Elhanan Helpman & Marc J. Melitz & Stephen R. Yeaple, 2004. "Export Versus FDI with Heterogeneous Firms," American Economic Review, American Economic Association, vol. 94(1), pages 300-316, March.
  4. Foster, Lucia & Haltiwanger, John C. & Syverson, Chad, 2005. "Reallocation, Firm Turnover, and Efficiency: Selection on Productivity or Profitability?," IZA Discussion Papers 1705, Institute for the Study of Labor (IZA).
  5. Richard Baldwin & James Harrigan, 2011. "Zeros, Quality, and Space: Trade Theory and Trade Evidence," American Economic Journal: Microeconomics, American Economic Association, vol. 3(2), pages 60-88, May.
  6. Elhanan Helpman & Marc Melitz & Yona Rubinstein, 2007. "Estimating Trade Flows: Trading Partners and Trading Volumes," NBER Working Papers 12927, National Bureau of Economic Research, Inc.
  7. Jonathan Eaton & Samuel Kortum, 2004. "Trade in Capital Goods," Levine's Working Paper Archive 228400000000000019, David K. Levine.
  8. Hallak, Juan Carlos & Sivadasan, Jagadeesh, 2008. "Productivity, quality and exporting behavior under minimum quality constraints," MPRA Paper 24146, University Library of Munich, Germany.
  9. Benjamin R. Mandel, 2010. "Heterogeneous firms and import quality: evidence from transaction-level prices," International Finance Discussion Papers 991, Board of Governors of the Federal Reserve System (U.S.).
  10. 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.
  11. Richard E. Baldwin & Tadashi Ito, 2008. "Quality competition versus price competition goods - An empirical classification," IHEID Working Papers 07-2008, Economics Section, The Graduate Institute of International Studies, revised 30 Aug 2008.
  12. James E. Anderson & Eric van Wincoop, 2004. "Trade Costs," NBER Working Papers 10480, National Bureau of Economic Research, Inc.
  13. Melitz, Marc J, 2002. "The Impact of Trade on Intra-Industry Reallocations and Aggregate Industry Productivity," CEPR Discussion Papers 3381, C.E.P.R. Discussion Papers.
  14. Marc J. Melitz & Gianmarco I.P. Ottaviano, 2005. "Market Size, Trade, and Productivity," NBER Working Papers 11393, National Bureau of Economic Research, Inc.
  15. repec:oup:qjecon:v:123:y:2008:i:2:p:489-530 is not listed on IDEAS
  16. repec:oup:qjecon:v:119:y:2004:i:2:p:646-677 is not listed on IDEAS
  17. Hallak, Juan Carlos, 2006. "Product quality and the direction of trade," Journal of International Economics, Elsevier, vol. 68(1), pages 238-265, January.
  18. 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.
  19. Lawless, Martina & Whelan, Karl, 2007. "A Note on Trade Costs and Distance," MPRA Paper 5804, University Library of Munich, Germany.
  20. Jonathan Eaton & Samuel Kortum, 2004. "An Anatomy of International Trade: Evidence from French Firms," 2004 Meeting Papers 802, Society for Economic Dynamics.
  21. Jonathan Eaton & Samuel Kortum & Francis Kramarz, 2004. "Dissecting Trade: Firms, Industries, and Export Destinations," NBER Working Papers 10344, National Bureau of Economic Research, Inc.
  22. repec:oup:qjecon:v:123:y:2008:i:2:p:441-487 is not listed on IDEAS
  23. Johnson, Robert C., 2012. "Trade and prices with heterogeneous firms," Journal of International Economics, Elsevier, vol. 86(1), pages 43-56.
  24. Gianmarco Ottaviano & Thierry Mayer, . "The happy few: the internationalisation of European firms," Blueprints, Bruegel, number 12, June.
  25. Thomas Chaney, 2008. "Distorted Gravity: The Intensive and Extensive Margins of International Trade," American Economic Review, American Economic Association, vol. 98(4), pages 1707-21, September.
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