Title

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

Document Type

Journal article

Source Publication

The Review of Economic Studies

Publication Date

4-2012

Volume

79

Issue

2

First Page

609

Last Page

644

Publisher

Oxford University Press

Keywords

Heterogeneous firms, Exports, Vertical differentiation, Productivity, Gravity, Champagne

Abstract

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.

DOI

10.1093/restud/rdr030

Print ISSN

00346527

E-ISSN

1467937X

Funding Information

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.

Publisher Statement

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.

Additional Information

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

Full-text Version

Publisher’s Version

Recommended Citation

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