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The Importance of Consumer Taste in Trade

Author

Listed:
  • Aw-Roberts, Bee Yan
  • Lee, Yi
  • Vandenbussche, Hylke

Abstract

This paper documents the importance of consumer taste in the food industry using Belgian firm-product customs data by destination. We identify consumer taste through the use of a control function approach and estimate it jointly with other demand parameters using a very flexible demand specification. The results show that taste decreases in distance but this relationship is not monotonic. The contribution of consumer taste to actual export revenue ranges from 1% to 31% depending on the product category in the food industry. On average, consumer taste explains about as much of the variation in exports as marginal costs.

Suggested Citation

  • Aw-Roberts, Bee Yan & Lee, Yi & Vandenbussche, Hylke, 2019. "The Importance of Consumer Taste in Trade," CEPR Discussion Papers 13614, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:13614
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    References listed on IDEAS

    as
    1. Co┼čar, A. Kerem & Grieco, Paul L.E. & Li, Shengyu & Tintelnot, Felix, 2018. "What drives home market advantage?," Journal of International Economics, Elsevier, vol. 110(C), pages 135-150.
    2. repec:oup:restud:v:85:y:2018:i:4:p:2429-2461. is not listed on IDEAS
    3. Peter K. Schott, 2004. "Across-Product Versus Within-Product Specialization in International Trade," The Quarterly Journal of Economics, Oxford University Press, vol. 119(2), pages 647-678.
    4. Mark J Roberts & Daniel Yi Xu & Xiaoyan Fan & Shengxing Zhang, 2018. "The Role of Firm Factors in Demand, Cost, and Export Market Selection for Chinese Footwear Producers," Review of Economic Studies, Oxford University Press, vol. 85(4), pages 2429-2461.
    5. repec:aea:apandp:v:109:y:2019:p:450-55 is not listed on IDEAS
    6. Antoine Gervais, 2015. "Product quality and firm heterogeneity in international trade," Canadian Journal of Economics, Canadian Economics Association, vol. 48(3), pages 1152-1174, August.
    7. Olley, G Steven & Pakes, Ariel, 1996. "The Dynamics of Productivity in the Telecommunications Equipment Industry," Econometrica, Econometric Society, vol. 64(6), pages 1263-1297, November.
    8. Stephen J. Redding & David E. Weinstein, 2019. "Aggregation and the Gravity Equation," AEA Papers and Proceedings, American Economic Association, vol. 109, pages 450-455, May.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    consumer heterogeneity; exports; firm-product; marginal cost; Quality; tastes;

    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade

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