Decomposing Firm-Product Appeal: How Important Is Consumer Taste?

KU LEUVEN - Discussion Paper Series, DPS18.03, February 2018

60 Pages Posted: 12 Mar 2018

See all articles by Bee Yan Aw

Bee Yan Aw

Pennsylvania State University

Yi Lee

National Tsing Hua University

Hylke Vandenbussche

Catholic University of Leuven (KUL), CEPR

Multiple version iconThere are 2 versions of this paper

Date Written: February 9, 2018

Abstract

We develop and structurally estimate a trade model in order to identify the importance of consumer taste for exporters. The model separates taste from quality and productivity (TFPQ) at the firm-product level. Export data by destination countries allow us to identify the level of taste from consumer heterogeneity across destinations. We decompose export revenue into the contribution of taste, quality and costs. We find that taste is very important and explains about 50% of the variation in export revenue. Productivity (TFPQ) differences between firm-products become more prominent than taste in explaining export success only when the cost elasticity of improving quality is high.

Keywords: tastes, quality, productivity, exports, firm-product

JEL Classification: F12, F14

Suggested Citation

Roberts, Bee Yan and Lee, Yi and Vandenbussche, Hylke, Decomposing Firm-Product Appeal: How Important Is Consumer Taste? (February 9, 2018). KU LEUVEN - Discussion Paper Series, DPS18.03, February 2018, Available at SSRN: https://ssrn.com/abstract=3135741 or http://dx.doi.org/10.2139/ssrn.3135741

Bee Yan Roberts (Contact Author)

Pennsylvania State University ( email )

501 Kern Building
University Park, PA 16802-3306
United States
814-863-1996 (Phone)
814-863-4775 (Fax)

HOME PAGE: http://econ.la.psu.edu/Biography_Pages/VITA.0901.pdf

Yi Lee

National Tsing Hua University ( email )

No. 101, Section 2, Guangfu Road, East District
Hsin Chu 3, 300
China

Hylke Vandenbussche

Catholic University of Leuven (KUL), CEPR ( email )

Faculty of Economics
Naamsestraat 69
B-3000 Leuven, 3000
Belgium
+32 16 326 920 (Phone)
+32 16 326 732 (Fax)

HOME PAGE: https://www.sites.google.com/site/vandenbusschehylke/home-1

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