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

Matthieu Daniel CROZET, Keith HEAD, Thierry MAYER

Research output: Journal PublicationsJournal Article (refereed)

110 Citations (Scopus)

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.
Original languageEnglish
Pages (from-to)609-644
Number of pages36
JournalThe Review of Economic Studies
Volume79
Issue number2
DOIs
Publication statusPublished - 1 Apr 2012
Externally publishedYes

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Bibliographical note

This article also published as Crozet, M., Head, K., and 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

Keywords

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

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