International Trade, Quality Sorting and Trade Costs: The Case of Cognac

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This paper tests empirically the validity of the Alchian and Allen eect, using an original dataset of French Cognac exports by quality designations. More specically, we estimate the impact of trade costs on the share and relative price of high quality Cognac. The denition of quality, based on the minimum time in oak of the youngest eau-de-vie used in creating the blend, is subject to regulations and is constant and objective, which makes the case of Cognac particularly relevant to analyze the impact of dierent trade costs on the quality mix. Our estimation proceeds in two parts. First, we investigate to what extent distance and customs duties impact the Cognac quality mix from 1996 to 2013. Second, we assess the impact of a variation in trade costs, through the adoption of containerization, on the quality mix of Cognac exports between 1969 and 2013. Our results conrm the Alchian and Allen eect: per-unit trade costs increase the share of high quality Cognac and have the opposite impact on its relative price.

JEL Class  

F10, F13, F14


Quality mix, luxury product, distance, tariffs