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Quality sorting and trade: Firm-level evidence for French wine

Author

Listed:
  • Matthieu Crozet

    (CES - Centre d'économie de la Sorbonne - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique, PSE - Paris School of Economics - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - EHESS - École des hautes études en sciences sociales - ENPC - École nationale des ponts et chaussées - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement, CEPII - Centre d'Etudes Prospectives et d'Informations Internationales - Centre d'analyse stratégique)

  • Keith Head

    (Sauder - Sauder School of Business [British Columbia] - UBC - University of British Columbia [Canada])

  • Thierry Mayer

    (CEPII - Centre d'Etudes Prospectives et d'Informations Internationales - Centre d'analyse stratégique, ECON - Département d'économie (Sciences Po) - Sciences Po - Sciences Po - CNRS - Centre National de la Recherche Scientifique, CEPR - Center for Economic Policy Research)

Abstract

Empirical investigation of the quality interpretation of the Melitz (2003) model of fi rm heterogeneity and trade has been limited by lack of direct data on quality. This paper matches firm-level export data with expert assessments of the quality of Champagne producers to estimate the key parameters of that model. Quality monotonically increases firm-level prices, the probability of market entry, and export values. The estimated model which calibrates the relative importance of firm-level quality and idiosyncratic demand accurately predicts the average quality exported to each country. Simulations show that the data reject the polar alternatives where outcomes are based entirely on either quality or randomness.

Suggested Citation

  • Matthieu Crozet & Keith Head & Thierry Mayer, 2012. "Quality sorting and trade: Firm-level evidence for French wine," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) hal-00610947, HAL.
    • Handle: RePEc:hal:cesptp:hal-00610947
    DOI: 10.1093/restud/rdr030
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    Keywords

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    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F17 - International Economics - - Trade - - - Trade Forecasting and Simulation
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L15 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Information and Product Quality

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