The Importance of Consumer Taste in Trade

Hylke Vandenbussche, Bee Yan Aw-Roberts and Yi Lee

No 13614, CEPR Discussion Papers from Centre for Economic Policy Research

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 very flexible 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 (search for similar items in EconPapers)
JEL-codes: F12 F14 (search for similar items in EconPapers)
Date: 2019-03
New Economics Papers: this item is included in nep-int
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Related works:
Working Paper: The importance of consumer taste in trade (2019)
Working Paper: The importance of consumer taste in trade (2019)
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