"Quality Sorting and Trade: Firm-Level Evidence for French Wine,"
CEPII Working Paper 2009- 14 , July 2009 , CEPII.
Firm-level regressions show that Champagne producers that receive better ratings from wine guides also export to more markets, charge higher prices, and sell more in each market. Our method corrects for a severe selection bias predicted by the model. By using direct measures of quality, we can recover estimates of parameters from a Melitz-based model of heterogeneous firms. We then regress averages of the quality, price, and quantity shipped to a country on measures of its attractiveness and entry costs. Champagne exhibits quality-sorting: more attractive markets tend to have lower average qualities and prices, but higher quantities.
GRAVITY MODEL ; HETEROGENEITY ; QUALITY ; INTERNATIONAL TRADE