Discussion paper

DP13614 The Importance of Consumer Taste in Trade

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.


Vandenbussche, H, B Aw-Roberts and Y Lee (2019), ‘DP13614 The Importance of Consumer Taste in Trade‘, CEPR Discussion Paper No. 13614. CEPR Press, Paris & London. https://cepr.org/publications/dp13614