Export Behaviour of Italian Food Firms Across Destinations : Does Product Quality Matter?

Using firm-level data we investigate the export behaviour of Italian food firms during 2001-2006, focusing on the link between total factor productivity (TFP), products quality, and export across destinations. Specifically, we test the main propositions of an international trade model based on firm heterogeneity in product quality and non-homothetic preferences. Under this setting, the export intensity toward low income destinations should be negative related to TFP, as an effect of firm heterogeneity in products quality. Using different measures of revenue-TFP and several proxies for product quality we find support for the main model predictions, showing also that the elasticity of export intensity across destinations is systematically higher (in absolute value) for a sub-sample of Italian firms producing typical ‘Made in Italy’ products.