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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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  18. James E. Anderson & Eric van Wincoop, 2004. "Trade Costs," Boston College Working Papers in Economics 593, Boston College Department of Economics.
  19. 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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