Working Paper: CEPR ID: DP14941
Authors: Hylke Vandenbussche; Bee Yan Awroberts; Yi Lee
Abstract: This paper documents the importance of consumer taste for the food industry using firm-product level customs data by destination country. We identify consuer taste through the use of a control function approach and estimate it jointly with other demand parameters using a flexible demand specification. We find that, on average, consumer taste explains as much of the variation in export revenue as marginal costs. The contribution of consumer taste to export revenue variation, ranges between 2% to 30% depending on the product category in the food industry. Our results also show that consumer taste decreases in distance but this relationship is non-monotonic.
Keywords: consumer taste; quality; productivity; exports; firm-product; food
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 revenue (F10) |
| distance (R12) | consumer taste (D12) |
| consumer taste (D12) | distance (R12) |
| consumer taste (D12) | trade flows (F10) |
| distance (R12) | export revenue (F10) |