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

Listed author(s):
  • Matthieu Crozet

    ()

    (CES - Centre d'économie de la Sorbonne - CNRS - Centre National de la Recherche Scientifique - UP1 - Université Panthéon-Sorbonne, PSE - Paris School of Economics, 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)

  • Thierry Mayer

    (CEPII - Centre d'Etudes Prospectives et d'Informations Internationales - Centre d'analyse stratégique, IEP Paris - Sciences Po Paris - Institut d'études politiques de Paris, CEPR - CEPR)

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.

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Paper provided by HAL in its series PSE - Labex "OSE-Ouvrir la Science Economique" with number hal-00610947.

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Length:
Date of creation: 2012
Publication status: Published in Review of Economic Studies, Oxford University Press (OUP), 2012, 79 (2), pp.609-644. <10.1093/restud/rdr030>
Handle: RePEc:hal:pseose:hal-00610947
DOI: 10.1093/restud/rdr030
Note: View the original document on HAL open archive server: https://hal.archives-ouvertes.fr/hal-00610947
Contact details of provider: Web page: https://hal.archives-ouvertes.fr/

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