The importance of consumer taste in trade

Bee Yan Aw, Yi Lee and Hylke Vandenbussche

No 635807, Working Papers of Department of Economics, Leuven from KU Leuven, Faculty of Economics and Business (FEB), Department of Economics, Leuven

Abstract: This paper documents the importance of consumer taste in trade flows 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. Consumer taste is identified for every trade ow. The results show that taste decreases in distance but this relationship is not monotonic. The contribution of consumer taste to actual export revenue ranges between 1-31% depending on the product category in the food industry. Overall, the demand shifters, taste and product quality explain twice as much of the variation in export revenues than cost.

Pages: 48
Date: 2019-03-26
New Economics Papers: this item is included in nep-int
Note: paper number DPS 19.02
References: Add references at CitEc
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Published in FEB Research Report Department of Economics

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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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Persistent link: https://EconPapers.repec.org/RePEc:ete:ceswps:635807

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