Working Paper: CEPR ID: DP13614
Authors: Hylke Vandenbussche; Bee Yan Awroberts; Yi Lee
Abstract: This paper documents the importance of consumer taste in the food industry using Belgian firm-product customs data by destination. We identify consumer taste through the use of a control function approach and estimate it jointly with other demand parameters using a veryflexible demand specification. The results show that taste decreases in distance but this relationship is not monotonic. The contribution of consumer taste to actual export revenue ranges from 1% to 31% depending on the product category in the food industry. On average, consumer taste explains about as much of the variation in exports as marginal costs.
Keywords: tastes; quality; marginal cost; exports; firm-product; consumer heterogeneity
JEL Codes: F12; F14
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| consumer taste (D12) | export success (Y10) |
| consumer taste (D12) | export revenues (F10) |
| distance (R12) | consumer taste (D12) |
| marginal costs (D40) | export success (Y10) |
| consumer taste and quality (L15) | heterogeneity (D29) |