Quantifying Consumer Taste in Trade: Evidence from the Food Industry

48 Pages Posted: 30 Jan 2023

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

Date Written: 2023

Abstract

This paper develops an empirical model of consumer taste in twenty-nine Belgium food industries for the period from 1998-2005 to generate a “taste distance” measure of over 1,800 firm-product exports to 53 country destinations. We estimate consumer taste using a control function approach and perform a decomposition of export revenues of firm-products to establish the importance of representative consumer taste relative to quality and marginal cost in export success. We find substantial taste heterogeneity in food exports across destination countries. Overall, in the large majority of food exports, consumer taste is an important and separate demand determinant to explain export revenues. Depending on the product, taste for a product explains between 4-30% of export revenues. Thus, any taste shock due to events such as pandemics or climate change, may induce substantial changes in export profitability of firms.

Keywords: consumer taste, quality, productivity, exports, firm-product, food

JEL Classification: F120, F140

Suggested Citation

Roberts, Bee Yan and Lee, Yi and Vandenbussche, Hylke, Quantifying Consumer Taste in Trade: Evidence from the Food Industry (2023). CESifo Working Paper No. 10234, Available at SSRN: https://ssrn.com/abstract=4340093 or http://dx.doi.org/10.2139/ssrn.4340093

Bee Yan Roberts

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 (Contact Author)

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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