Quality sorting and trade : firm-level evidence for French wine
The Review of Economic Studies
Oxford University Press
Heterogeneous firms, Exports, Vertical differentiation, Productivity, Gravity, Champagne
Empirical investigation of the quality interpretation of the Melitz (2003)model of firm heterogeneity and trade has been limited by the 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.
This paper is produced as part of the project European Firms in a Global Economy: Internal policies for external competitiveness (EFIGE), a collaborative project funded by the European Commission's Seventh Research Framework Programme, Contract # 225551.
Copyright © The Author 2011. Published by Oxford University Press on behalf of The Review of Economic Studies Limited.
Access to external full text or publisher's version may require subscription.
This article also published as Crozet, M., Head, K., & Mayer, T. (2009). Quality sorting and trade: Firm-level evidence for French wine. CEPII Working Paper, (2009-14). France: CEPII. Retrieved from http://www.cepii.fr/PDF_PUB/wp/2009/wp2009-14.pdf
Crozet, M., Head, K., & Mayer, T. (2012). Quality sorting and trade: Firm-level evidence for French wine. The Review of Economic Studies, 79(2), 609-644. doi: 10.1093/restud/rdr030