Julien Martin
email: martin.julien@uqam.ca

Florian Mayneris
email: florian.mayneris@uclouvain.be

Nicolas Berman

Andrew Bernard

Lionel Fontagné

Jean Imbs

Sébastien Jean

Hélène Latzer

Thierry Mayer

Isabelle Méjean

Mathieu Parenti

Valérie Smeets

Jacques Thisse

Frédéric Warzynski

High-End Variety Exporters Defying Distance: Micro Facts and Macroeconomic Implications *

Keywords: JEL classification: F14, F43, L15, Keywords: Vertical differentiation, Gravity, Distance, Volatility

We develop a new methodology to identify high-end variety exporters in French firmlevel data. We show that they do not export to many more countries, but they export to more distant ones. This comes with a greater geographic diversification of their aggregate exports. In contrast to low-end export(er)s, we find that distance has almost no effect on high-end variety export(er)s. We also show that high-end export(er)s are more sensitive to the average income of the destination country. Because of this different sensitivity to gravity variables at the micro-level, specializing in the production of high-end varieties has two macroeconomic implications for countries. First, the sources of a country's aggregate exports volatility are modified. The higher sensitivity to per capita income increases the sensitivity of high-end variety exports to destination-specific demand shocks, and thus their volatility on a given market. However, their lower sensitivity to distance allows for a greater geographic diversification of their exports, which in turn reduces aggregate volatility through a portfolio effect. Second, the lower sensitivity to distance allows highend varieties to benefit more from demand growth, especially when it arises in distant markets.

Introduction

Developed countries are specializing, within products, in the production of high-end varieties. Both academics and policy makers encourage this trend, with the view that it is likely to insulate developed countries from low-wage countries' competition. 1 While this shift in the industrial pattern of developed countries is increasingly documented, its implications are not. 2 This paper is a first step toward a better understanding of the macroeconomic implications of specializing in the production of high-end varieties. Using French firm-level data, we study empirically how the specific features of high-end variety exports could affect the response of aggregate foreign sales to demand shocks abroad, focusing on two main dimensions: export volatility and presence on fast-growing markets. This is an important issue, since both the volatility and the geography of a country's exports are likely to affect macroeconomic outcomes such as welfare, long run growth, labor market equilibria, and inequality. 3 The first macroeconomic implication we point out is that specializing in high-end varieties affects the sources of aggregate exports' volatility. Since high-end exporters are more sensitive to income shocks, selling this type of varieties increases the volatility of exports in a given market. However, high-end exporters serve a more diversified portfolio of countries, which smoothes the volatility of their aggregate exports. The change in aggregate volatility induced by the specialization in high-end varieties depends on the relative magnitude of these two opposing effects. Looking at French exports over the period 2000-2006, we find a destination-specific volatility of 0.089 for high-end varieties and 0.064 for low-end ones. However, the greater destination-specific volatility of high-end exports is entirely compensated by diversification. Actually, in our data the aggregate volatility of high-end exports is the same as the aggregate volatility of low-end ones (0.036). The second implication is that high-end varieties are better able to reach countries where income grows faster, in particular when these countries are distant. We show that these two results find their origin in the specific micro behavior of high-end variety exporters. The lower sensitivity to distance of high-end exporters relative to low-end ones is actually key to explaining our findings. This lower sensitivity allows for a wider geographic dispersion of their sales, and makes them better equipped to redirect their exports toward fast growing markets, wherever these markets are.

The main challenge of this paper is to empirically identify high-end variety exporters. We view high-end exporters as firms selling expensive varieties of a product, these varieties having specific attributes such as reputation, branding, or quality that make them appealing 1 For instance, Peter Schott states that "vertical specialization within product markets can also help insulate workers in developed countries from the low wages of workers in developing economies.". The EU commission shares the same point of view: "Europe needs to develop and consolidate areas of comparative advantage in high value and high-tech design and production"

2 See Schott (2004); Fontagné, Gaulier, and Zignago (2008); Martin and Méjean (2011) for evidence of specialization. Regarding its implications, only the direct effect on the labor market has been studied (e.g. Verhoogen, 2008; Mion and Zhu, 2011).

3 di Giovanni and Levchenko (2009) review the effect of volatility on macroeconomic outcomes. Brambilla, Lederman, and Porto (2012) document why "where you export to" matters.

to consumers in spite of their higher price. To distinguish high-end exporters from low-end ones in French Customs data, we make use of the list of members of the Comité Colbert, an organization composed of the main brands of the French luxury industry. 4 We (reasonably) assume that these firms are exporting high-end varieties and we apply the following rule: firms that sell the same products at least at the same price (we use interchangeably price and unit value) as Colbert firms are tagged as high-end variety exporters. Colbert firms are thus used as an exogenous benchmark.5 Doing so, we are able to distinguish high-and low-end variety exporters for 200 products that account for 10% of total French exports in the last decade. Various checks confirm that the firms we identify as high-end exporters do belong to the upper segment for their product/industry. 6 We thus participate to the recent literature on trade and quality. Three main approaches have been proposed so far to identify high quality exporters: unit values (Schott, 2004), parametric measures (Khandelwal, 2010; Hallak and Schott, 2011) and external measures (Crozet, Head, and Mayer, 2012). Our approach combines the unit value and external measure approaches. The use of the prices set by Colbert firms is crucial since the price threshold above which a firm can be said to sell high-end varieties is likely to depend on consumer preferences and on the composition of the industry in terms of variety type. Our method allows us to obtain a product-specific threshold, grounded in an external measure of "high-endness".

With this classification of French exporters at hand, we show that specializing in high-end varieties is not likely to affect the anatomy of an economy in terms of firm-size distribution. Indeed, the distribution of firm-level exports, product scope and country scope displays huge heterogeneity for both high-and low-end exporters. Among high-end variety exporters, extremely large players co-exist with very tiny niche producers, as is the case for the entire population of firms (Eaton, Kortum, and Kramarz, 2011). Hence, as in Holmes and Stevens (2010), our results point to the importance of niche producers among high-end exporters, i.e. firms exporting substantial amounts of a few high-priced products to a few markets. This challenges the view emerging in the recent theoretical literature on trade and quality that top-quality producers are larger and more productive firms serving a higher number of markets (Baldwin and Harrigan, 2011).

In fact, the key difference between high-and low-end variety exporters is the average distance of their shipments. High-end variety firms export to more distant markets on average, which goes together with a wider geographic diversification of their aggregate exports. We find that more than 70 percent of low-end variety exports are concentrated toward European countries. By contrast, less than 50 percent of high-end variety exports are directed to Europe.

To understand the roots of this peculiar geography, we compare the sensitivity of high-end and low-end variety exports to different gravity variables, both at the firm and at the product level. As expected, high-end variety export(er)s are more sensitive to average income and income distribution, and less sensitive to distance. 7 However, a simple quantitative exercise demonstrates that the wider geographic diversification of high-end variety exports is entirely driven by their lower sensitivity to distance.

We then use the results obtained from gravity equations to run some quantitative exercises and investigate the macroeconomic implications of specializing in high-end varieties. To the best of our knowledge, we are the first to provide such insights on the macro consequences of specializing on a given segment when varieties are vertically differentiated. 8 We first show that in presence of country-specific demand shocks, specializing in highend varieties is likely to change the volatility of aggregate exports through two opposing effects. On the one hand, high-end exporters are more sensitive to income shocks since the consumption of high-end varieties increases with income. We find that in a given destination country, high-end exporter sales are 40% more volatile than those of low-end exporters. On the other hand, the lower sensitivity to distance makes high-end exporters better able to diversify their exports toward countries that face less synchronized demand shocks. Over the period we consider, this "diversification effect" reduces the volatility of their total sales abroad by 40% as compared to a situation where they would have the same sensitivity to distance as low-end exporters. Eventually, in our sample, the two effects compensate.

Second, we show that high-end exporters are more likely to redirect their sales toward fast-growing economies. The correlation we observe between the income growth in a given country and the share of this country in overall exports is positive for both high-and low-end variety exporters, but stronger for the former. Importantly, we find that this stronger positive correlation is entirely driven by their lower sensitivity to distance. Put differently, high-and low-end variety exporters have the same ability to reap the gains from growth in countries neighboring France. However, if the sources of growth are in distant markets, as has been the case over the last decade with the growing importance of East Asia in world demand, high-end variety firms are better equipped to meet demand there.

Our study is based on French firm-level data and on 200 products. However, our results and the mechanisms we highlight more generally apply to any sector featuring vertically differentiated varieties of the same goods, and to any country surrounded by homogeneous slow-growth neighbors. Our analysis is thus also relevant for other Western European and North-American countries. For instance, as shown by Fontagné and Hatte (2013), other big European countries such as Germany, Italy, UK, or Switzerland are also important producers of high-end varieties. Consistent with our findings, high-end (aggregate) exports by these countries are shown to be less sensitive to distance and more sensitive to demand shocks. Hence, a deeper specialization in high-end varieties is likely to change the volatility of exports and the ability to meet demand abroad for these countries too.

The rest of the paper is organized as follows. Section 2 describes the data and the method used to identify high-end variety exporters. Section 3 presents the stylized facts. Section 4 discusses the results of our empirical analysis of the gravity determinants of high-and low-end variety exports, both at the firm and at the aggregate level. Section 5 presents thought experiments based on our empirical analysis. These exercises allow us to quantify the macroeconomic implications of specializing in high-end varieties for the volatility and the geography of aggregate exports. Lastly, section 6 concludes.

Data

In this section, we describe the firm-level data we use and the procedure we follow to identify French high-end variety exporters.

Comité Colbert and French Customs Data

We first use the list of members of the Comité Colbert, which will serve as our benchmark for the identification of French high-end variety exporters. The Comité Colbert is an organization founded in 1954 to promote the French luxury sector. Two main types of actions are undertaken by this committee. It organizes international events, so as to improve the visibility of French luxury products abroad; the Comité Colbert was very active in particular in the US and in Japan in the 1980s and the 1990s, while now it focuses its efforts on emerging markets (China, Russia, India and the Middle East in particular). The Comité Colbert is also involved in lobbying activities to increase the awareness of the French and European public authorities of the specific needs of the luxury industry: issues related to skill availability, training or access to international markets are on its agenda for example. A firm needs to be co-opted to become a member of the Comité Colbert. According to the Comité's website, five criteria are taken into account: "international ambition and brand identity", "quality", "creation", "poetry of the product" and "ethics". In line with our definition of high-end variety exporters, Colbert firms are not only top-quality producers; their products must also be perceived by consumers as having a strong specificity and identity, which explains overall why consumers are willing to pay for these products.

76 companies are currently members of the organization, among which the most emblematic brands of the French luxury industry (Baccarat, Dior, Chanel, Hermès, Vuitton etc.). They cover various industries such as cosmetics, wine and champagne, clothing, leather goods or furniture. The entire member list is reported in Table A-1 in the Appendix. Each brand might actually be composed of several firms, a firm being defined as a legal entity identified thanks to a unique identification number in all French administrative datasets. [START_REF]Figure A-3: Value of hs6-products with high-end varieties (% of total French exports)[END_REF] We collect these identification numbers thanks to the website www.verif.com that allows to recover French firms' identifier based on their name. We end-up with 136 firms (i.e. entities with a SIREN identifier) corresponding to the 76 members of the Comité Colbert. From now on, we use interchangeably the words "firm" and "exporter".

We then identify Colbert firms in customs data for the 2000-2011 period. French customs data record export flows at the firm/cn8 product10 /country level. Both the value and the volume of exports (in kg) are available until 2006; after this date, reporting the volume of exports stopped being compulsory.11 The information is available for all manufacturing exporters that export at least 100,000 euros within the EU, or 1,000 euros outside the EU.12

Identification of Products Featuring French High-End Exporters

The aim of this paper is to compare firms exporting high-and low-end varieties of the same product. From now on, a product is defined as a 6-digit category in the harmonized system nomenclature. We prefer working at the 6-rather than the 8-digit level of the nomenclature to ensure that the number of exporters within a given product category is high enough to allow for comparisons. Moreover, we only consider exports from 2000 to 2006, since export volumes suffer from many missing values after this date. We compute unit values as the ratio of the value of exports over quantities for each firm-hs6-country-year observation.

Within a given product category, high-end exporters are exporters of high-priced varieties. However, as shown on Graph A-1 in the Appendix, the distribution of firm-level prices (demeaned with respect to the average observed for this product-country-year) varies from one sector to the other. Hence, using the same threshold (in terms of percentile) for each product to identify high-end variety exporters might be misleading. Moreover, the price premium that consumers are willing to pay for high-end varieties might differ across products; if this is the case, the threshold price defining high-end varieties might be product-specific, even when the distributions of firm-level prices are the same. To address these issues, we use Colbert firm export prices as a benchmark to identify high-end exporters. We thus have to restrict our analysis to the hs6-products exported by Colbert firms. This section describes how we identify these products, for which we will then be able to distinguish in the data both highand low-end variety exporters.

Colbert firms are active in less than half of all the products exported by French firms over the period (2,107 hs6-products over this period, out of 5,467 products exported by French firms). This is not surprising since luxury industries are final consumption product industries. There is no reason why firms active in the nuclear industry, the construction material industry or the basic chemical industry should be members of the Comité Colbert. Moreover, for some final consumption goods, France might not be a producer of high-end varieties. For example, there are no car producers in the Comité Colbert, which reflects the fact that French cars are mainly positioned in the middle range of the quality ladder13 , while Germany, the UK and Italy have brands as famous as BMW, Porsche, Rolls-Royce, Aston Martin, Ferrari or Lamborghini.

Moreover, Colbert firms are multi-product exporters. Over the period, each one of them was active in 163 products on average (median equal to 93). However, the within-firm distribution of exports across products is very skewed: on average, the top product accounts for 54% of total firm-level exports (median equal to 47%). For example, some products such as "calendars and calendar blocks" or "glass mirrors"14 are exported in small quantities and account for a marginal share of the total exports by Colbert firms. We thus decide to restrict our analysis to the main products exported by Colbert firms, i.e. products that represent at least 5% of total exports for at least one Colbert firm from 2000 to 2006, and that are exported by at least one Colbert firm every year. This definition leaves us with 269 hs6products, accounting for 61% of the firm-product-country-year level observations of Colbert firms, but 94% of the overall value of their exports over the period. These products are thus very representative of the export activities of Colbert firms.

Finally, vertical differentiation might sometimes occur across, rather than within, hs6 product categories. In this case, some hs6 products might not be exported by Colbert firms because they correspond to low-end varieties of a given product. We still want to consider these products for our definition of high-and low-end variety exporters. We checked and added such hs6 products manually. We end up with 308 hs6 product categories in our database, corresponding to 198 "broad" products once the hs6 categories that clearly represent varieties of a single product are grouped under a single identifier. This is the case, for example, for hs6 categories 420221, 420222 and 420229 that all correspond to handbags, made of different materials. 15 These "broad" product categories will be used for the estimation of gravity equations where we will compare, within "broad" products, high-and low-end variety exporters in terms of sensitivity to gravity determinants.

As shown on Figure A-2 in the Appendix, the exports of the products we consider in our analysis tend to increase between 2000 and 2011, except in 2009 where we can observe a dramatic drop in exports due to the financial crisis. However, they increase (and decrease) more or less at the same pace as in the other sectors of the economy. As appears on Figure A-3, this results in a rather stable share of the products we conserve in our sample, which fluctuates around 9% of overall French exports over the period. Beverages, cosmetics and apparel and footwear account for the biggest share of exports in our sample (see Table A-2 in the Appendix).

Identification of High-End Variety Exporters

There are only 76 brands in the Comité Colbert, which certainly do not represent the entire population of French high-end variety exporters. In this section, we detail the procedure we follow to identify "non-Colbert" French high-end exporters.

Since high-end varieties are more expensive due to more expensive inputs (Baldwin and Harrigan, 2011; Kugler and Verhoogen, 2012), to a higher consumer willingness to pay (Gabszewicz and Thisse, 1979), or to a lower elasticity of substitution (Fajgelbaum, Grossman, and Helpman, 2011), we expect the export prices of Colbert firms to be significantly higher than those of other exporters, reflecting higher production costs and/or higher markups. Actually, a simple regression including product-country-year fixed effects shows that on average, Colbert firms charge prices that are 2.25 times higher than prices charged by other firms. French firms exporting the same products as Colbert firms and charging at least the same price will then be defined as high-end variety exporters. Note that quantifying the exact determinants of the price premium, i.e. disentangling quality from reputation is beyond the scope of this paper. 16 We just want to identify firms that are able to charge high prices for their varieties and still meet demand abroad.17

Our procedure follows two steps:

• Classification of firm-hs6 product pairs: we use the firm-product-country-year level export database. We compute unit values at the firm-hs6-country-year level. We then aim at identifying, within a given hs6, those firms that export high-priced varieties. One option would be to compute average unit values at the firm-hs6 level, and to compare Colbert and non-Colbert firm export prices. However, firms differ in terms of the countries they export to. This might be an issue, since several papers show that firm-level prices might vary across destinations: average income, through price discrimination (Simonovska, 2010), or distance, through quality sorting (Bastos and Silva, 2010) and price discrimination again (Martin, 2012), could matter. Consequently, the average unit value at the firm-hs6 level may depend on the destination country portfolio. On the contrary, we want to capture a proxy for the firm-hs6 "baseline" price that is independent from the countries it exports to. It is all the more important since we are interested in the relationship between the variety type and the geography of exports.

This is why first we estimate the following equation separately for each hs6:

luv ict = µ ct + u i + ict (1)
where, for a given hs6 product, luv ict is the log of the export unit value of firm i to country c at time t, µ ct is a country-year fixed effect capturing all the pricing-to-market or discrimination effects that might affect firm-level prices to country c at time t, as well as all aggregate changes in unit values over time, and ict is an i.i.d. disturbance term. Finally, u i is a firm fixed effect that captures the invariant part of firm-hs6 product unit values observed from 2000 to 2006.

On average, within a given hs6, the fixed effects for Colbert firms are 2.39 times bigger than the fixed effects for other firms. Then, a firm is said to export high-end varieties of a given hs6 product if its fixed effect is at least equal to the first quartile of the fixed effects measured for this same hs6 product among Colbert firms.18

• Classification of exporters: After the first step, a variety type (high-or low-end) is assigned to each firm-hs6 cell. However, many firms are multiproduct exporters and some firms might appear as high-end variety exporters for some products, but not for others in their portfolio. We want to build a classification of high-end variety exporters at the firm level. A firm is then said to be a high-end variety exporter if at least 85% of the value of its exports from 2000 to 2006 corresponds to high-end variety exports. Consequently, firms that are not classified as high-end variety exporters are firms that export the same hs6 products as Colbert firms at a lower price, or firms that mainly export other hs6 products than those exported by Colbert firms. 19 After this two-step procedure, we end up with 8,379 high-end variety exporters, out of nearly 65,000 exporters active for at least one year between 2000 and 2006 in the products in our sample. Checking that all those 8,379 firms are actually high-end variety exporters is not feasible in practice. However, we checked the identity of the 20 biggest ones. For confidentiality reasons, we cannot give their name but we can confirm that all of them belong to the French luxury industry : we are thus confident in the reliability of our method to identify high-end exporters.

Note that in this paper, firm-level variety type is inferred based on all the export flows observed for this firm over the entire period, and not for each year: we do not allow firms to switch from low-to high-end varieties. Indeed, we focus on the export behavior of firms, conditioning on the type of varieties they sell, rather than on the determinants of this variety type.

High-End Variety Exporters and Price Premium

Table 1 presents the average price premium of all the high-end variety exporters we identify, by broad sector. 20 In all sectors, high-end variety exporters exhibit significantly higher unit values. This premium is actually quite big, from 40% for "paper and books" exporters to 280% for "miscellaneous" exporters (i.e. lighters and pencils). The share of high-end variety exporters in the population active between 2000 and 2006 also varies across sectors, from 5.2% in the textile industry to 22.9% for jewel exporters. This cross-sectoral heterogeneity, both in the price premium and in the share of high-end variety exporters, confirms the importance of having a product-specific benchmark to identify high-end variety exporters, rather than a single threshold, in terms of percentile or in terms of unit-value premium for example, common to all products.

As stated above, there might be different reasons why high-end variety exporters are able to set high prices: higher quality, reputation, specificity of the products, or branding. Since quality has been emphasized recently as an important dimension of differentiation in the trade literature, we propose an exercise in Table A-3 in the Appendix to see how our definition of high-end variety exporters compares to a measure of quality. We focus on champagne exporters and use, as in Crozet, Head, and Mayer (2012), Juhlin's rating as a measure of quality. 21 While high-end exporters represent a very small share of one-to three-star champagne producers, 49% and 87.5% of four-and five-star champagne exporters are high-end variety (first decile instead of first quartile) and for the identification of high-end variety exporters (threshold equal to 90% instead of 85%). All the results in the paper remain qualitatively the same. 20 The price premium is computed by estimating, for each broad sector separately, the following regression:

luvipct = αhigh end i + µpct + ict
where luvipct is the log of the export unit value for firm i, hs6 product p, country c and time t, high end i is a dummy identifying high-end variety exporters, including Colbert firms, and µpct is an hs6 product-country-year fixed effect. 21 We thank the authors for sharing with us their data on Juhlin's ratings. exporters according to our measure. These figures confirm for the champagne industry that quality and our definition of high-end varieties are positively correlated.

Stylized Facts

In this section, we analyze the evolution of French aggregate exports for high-and low-end varieties over time and across space. We also provide firm-level descriptive statistics on the firms we have identified as high-end variety exporters.

Evolution and Geographic Distribution of High-End Variety Exports

We present aggregate statistics for the entire sample of firms from 2000 to 2011. This sample takes the entry and exit of firms on export markets into account over the period; however, the amount of high-end variety exports is under-estimated from 2007 onwards, since we do not identify high-end variety producers that started exporting after 2006 (see the description of our procedure above). This is why we draw a vertical line in 2007 for all the graphs based on this sample. However, all the results hold if we focus on the firms that were active in 2000 and that still exported in 2011. 22 In terms of sectoral composition, cosmetics, beverages and leather goods represent 75% of the high-end variety exports over the period (see Table A-4), reflecting the very well-known French "savoir-faire" in perfumes, champagne, wine, luxury handbags and luggage. 22 The results are available upon request. Moreover, Figure 1 shows that, for the products in our sample, the share of high-end variety exports increased regularly between 2000 and 2011, from 32% in 2000 to almost 37% in 2011, the export growth being thus more rapid for high-end than for low-end varieties. This increased specialization of the French industry toward high-end varieties is consistent with a general trend observed in recent decades for most developed countries.

High-and low-end variety producers do not only differ in terms of export growth; the geographic distribution of their sales abroad also exhibits striking differences. Following the CEPII (CEPII, 2008), the world is divided into 10 regions. 23 From a static point of view, as shown on Figure 2, high-end variety exports are much more geographically diversified. They rely in particular less on the European market. On average, the EU27 account for 65% of low-end variety exports over the decade, but for less than 40% of high-end variety exports. If we take the other European countries into account, nearly 70% of low-end variety exports go to Europe versus less than 50% for the producers of high-end varieties. Moreover, each of the other regions of the world accounts for less than 10% of low-end variety exports while on the contrary, North America, Japan and Eastern Asia represent non-negligible markets for high-end varieties (at least 10% of overall exports for at least one year over the period).

The difference is not only static, it is also dynamic. The share of each region in overall exports is very stable from 2000 to 2011 for low-end variety exports. The share of Eastern Asia rises from 3.4 to 7.5%, the share of North America decreases from 10.7 to 9.0%, the share of the EU27 from 63.3% to 62.0%: no significant geographic reshuffling is at play. The picture is very different for high-end varieties, whose geographic distribution of exports changes considerably over the period: the share of fast-growing Eastern Asia surges from 12.8 to 27.8% between 2000 and 2011 (especially from 2004 onward), the share of Japan plummets from 12.0 to 6.1%, as well as the share of North America, from 20.4 to 14.1%.

Hence, high-end variety exports are not only geographically more diversified, they are also more prone to shift toward fast-growing economies. These aggregate patterns regarding the geography of exports are crucial since, as we will show in Section 5, they are likely to have an impact on aggregate volatility and the aggregate growth of exports.

We will now go further in this descriptive analysis and investigate how these macro features can be accounted for by the individual characteristics of high-and low-end variety exporters.

Anatomy of High-End Variety Exporters

In this section, we present firm-level descriptive statistics for the year 2005 (which will be used for the econometric analysis). Patterns are consistent however over the years. Moreover, among high-end variety exporters, we distinguish Colbert firms from the other high-end exporters we have identified thanks to our procedure.

Figure 3 focuses on the scope of the firm-level export portfolio in terms of products, countries and transactions (i.e. number of product-country observations for each firm). It presents cumulative distributions, i.e. the shares of firms having more than x products, countries or transactions. Colbert firms have a very wide portfolio: cumulative distributions show that they export many more products to many more countries, resulting into many more transactions than low-end variety firms. Actually, on average, Colbert firms export 28.1 products (median equal to 15.5) to 26.3 countries (median equal to 22), resulting in 199.5 transactions (median equal to 56). As a comparison, on average, low-end variety firms export 4.4 products (median equal to 2) to 5.1 countries (median equal to 2) with a total of 14 transactions (median equal to 3). As shown by cumulative distributions, the other high-end variety exporters tend to be even smaller in terms of product and transaction scope: they export 2.4 products (median equal to 1) to 5.8 destinations (median equal to 3) for a total of 9.3 transactions (median equal to 3).

However, regarding the value of shipments, firm-level export distributions graphed at the top of Figure 4 show that both Colbert firms and the other high-end variety exporters export substantially more than low-end variety exporters, either at the transaction level (firmproduct-country level) or at the firm level. Indeed, the density distributions of both variables are right-shifted for Colbert firms and the other high-end exporters as compared to low-end exporters. On average, Colbert firms export 66.7 million euros (median equal to 3.5 million euros), while the other high-end variety producers export 1.5 million euros (median equal to It is interesting to note that while on average high-end variety exporters charge a price that is twice as high as the low-end variety price, they still sell almost twice more: for these firms, a high price does not mean a significantly lower demand, confirming the idea that the firms we identify as high-end variety exporters export goods that appeal specifically to consumers.

Finally, high-end variety exporters export, on average, to more distant countries. 24 While for the three groups of exporters the distribution of the firm-level average distance of exports is double-peaked, there are more firms exporting to distant countries among Colbert firms and the other high-end variety exporters. On the opposite, lower values of average distance of exports are more often represented among low-end variety exporters. As a result, the average distance of exports is equal to 4,851 km (median equal to 4,830) for Colbert firms, to 4,318 km (median equal to 3,710 km) for the other high-end variety exporters and to 3,017 km (median equal to 1,410 km) for low-end variety exporters. Hence, the share of exports going to more distant countries is substantially higher for Colbert firms and for the other high-end variety exporters than for low-end variety exporters, as shown by the cumulative share of exports by distance on Figure 5 (this graph displaying the share of exports going to countries situated at less than x km from France, by category of exporters). 24 The average distance of exports at the firm level is the weighted average of the bilateral distance between France and the destination countries, using as weights the share of each country in total firm exports.

Linking Macro and Micro Stylized Facts

The greater aggregate geographic diversification of high-end variety exports which we have highlighted could be accounted for by the recent literature on international trade and quality. Indeed, following Baldwin and Harrigan (2011), high-quality firms charge higher prices and, thanks to a favorable demand shifter, export more than low-quality firms. They export in particular to a greater number of markets, their demand shifter allowing them to overcome the fixed export cost for more distant countries. This higher price and the bigger size of highquality producers, both in terms of markets and in terms of exports, is corroborated by Kugler and Verhoogen (2012) and Crozet, Head, and Mayer (2012). Even though the geography of exports is not directly investigated in these papers, one implication of these results is that the geographic distribution of aggregate exports mirrors the distribution of exports at the individual level: high-quality firms export to more (and more distant) countries, so that both firm-level and aggregate exports are geographically more diversified for high-quality varieties.

The picture that emerges from our analysis is a bit different and challenges this view. Except for a few superstar firms, the total exports by high-end variety firms are not bigger because of a wider scope of destination countries, but because of bigger sales on the markets they serve. Hence, many high-end variety exporters are in reality high-price niche producers that export a limited number of products to a limited number of countries.25 However, within the pool of countries they serve, high-end exporters are able to reach more distant countries on average. In other words, while Bollinger exports its champagne all over the world, there are many other high-end champagne producers that are far less ubiquitous but are still able to reach one or two very distant countries such as China, Japan, Brazil or South Africa. On the contrary, low-end champagne producers remain confined to the European market. These micro features imply, at the aggregate level, that high-end variety exports are more ubiquitous and geographically diversified than low-end variety exports, due to a relatively higher number of firms present in distant countries as compared with low-end variety firms; however, for a given product, the firms present in these distant countries might not be the same across markets.

We now want to understand why high-end variety exports have a better geographic coverage. We can think of two main explanations:

• Sensitivity to demand: if consumers' preferences for high-and low-end varieties are non-homothetic, i.e. if the share of high-end varieties is higher in the consumption basket of rich consumers, high-end variety exports should be more responsive to income distribution. This could explain why the geography of their sales abroad follows the worldwide distribution of income more closely.

• Sensitivity to distance: high-end variety exports might be less sensitive to distance, due to a lower elasticity of substitution or to their high price, in line with the Alchian-Allen effect that shows that when part of the transport cost is a fixed per-unit cost, the exports of high-quality varieties are less sensitive to distance. 26 The elasticity of transport costs to distance might also be lower for high-end varieties. In any of these cases, high-end variety exports could be less limited in terms of markets and could reach demand emanating from distant countries more easily.

We investigate this issue econometrically in the next section.

Gravity Equation

In this section, we compare the sensitivity of high-and low-end variety exports to the standard gravity determinants of exports. We use data for the year 2005, but the results are consistent over the years. We run the following regression:

y (f )hkct = i α i gravity (k)ct + i β i HighEnd hkct × gravity (k)ct + F E (f )hkt + (f )hkct
where h indicates whether exports are made of low-or high-end varieties, k is the product category of exports, c is the destination country, and t is the year of observation. The index f in parentheses indicates that part of our analysis is conducted at the firm-level. y (f )hkct is either the value of exports at the product (k) or firm (f ) or firm-product (f k) level, the number of exporting firms, or the average value of exports per firm, in logarithm. Gravity is a set of gravity determinants of exports. The baseline specification includes three variables: population (World Bank Data), GDP per capita (World Bank Data), and distance (from Mayer and Zignago, 2006). 27 In robustness checks, we further include other variables which have been shown to be important to understand trade patterns (see e.g. Head and Mayer, 2013). Namely, we add a dummy for the existence of a common language (CEPII), a dummy for the existence of colonial linkages (CEPII), and a dummy capturing the presence of a common border (CEPII). We also include the GINI index (World Bank Data) to control for the impact of income inequality on trade (see e.g. Fieler, 2011). HighEnd is a dummy equal to one if the flow we consider consists of high-end varieties. F E are fixed effects whose dimension varies across specifications. In some specifications , we add country fixed effect to account for the price index (or the multilateral resistance term) in the destination country.

Product-Variety Type-Destination Level Analysis

First, we work at the product-variety type-destination country level, and we ask if gravity determinants affect the level of exports of high-and low-end varieties in a different way.

The answer is yes, the exports of high-end varieties are less sensitive to distance and more sensitive to the per capita income of the destination country. Then, we estimate to what extent these differences are driven by the extensive margin (the number of firms exporting a given product to a given country) or the intensive margin (the average sales per firm for that product and that country). of product k, variety v (high-or low-end), to country c (Export kvc ) into the number of firms (#f irms kvc ) selling variety v to country c and the average sales per firm (X/f irm kvc ). We use data aggregated at the product-variety level, and include product-variety fixed effects in every regression. The coefficients are thus identified in the within dimension, across countries.

In the first three columns, we regress our three variables of interest on the log of distance, the log of population, and the log of GDP per capita and the interactions of these variables with a dummy equal to one for high-end varieties.

In column (1), as is standard in the literature, we find that exports at the product level increase with the size and wealth of the destination market and decrease with distance. The coefficients have the same order of magnitude as the coefficients estimated in the literature. The interaction terms measure the different sensitivity of these varieties to gravity variables. High-end varieties are relatively more sensitive to GDP per capita. A ten percent increase in the GDP per capita increases the exports of low-end varieties by 6.5 percent, while it increases the exports of high-end varieties by 8.5 percent. This is consistent with the view that preferences are non-homothetic and that high-end varieties are mostly consumed by richer households. Interestingly enough, we do not find any premium concerning the impact of population on high-end variety exports. The impact of distance is also significantly different for high-and low-end varieties. A 10 percent increase in distance reduces high-end variety exports by 0.8 percent, which is ten times less than for low-end varieties. Compared with estimates in the trade literature, the effect of distance on high-end variety exports is very small. After analyzing 2,508 estimates obtained from 159 papers, Head and Mayer (2013) report an average elasticity of trade to distance of 0.9 with a standard deviation of 0.4.

In columns ( 2) and (3), we decompose the value of exports into the number of firms of variety type h exporting product k to country c and the average value of exports per firm for that product, variety type and country. We see that the premium of high-end varieties in high-GDP-per-capita markets is due to the intensive margin: high-end variety exporters present in wealthy markets sell more than other exporters. When looking at the effect of distance, most of the direct impact of distance on low-end variety exports goes through the extensive margin (0.703/0.791=0.889). As a consequence, 70 percent of the premium on distance of high-end variety exports is driven by the extensive margin too (0.492/0.713=0.690).

In the last three columns, we include country fixed effects to control for the multilateral resistance terms. In this case, we can only identify the interaction terms. The coefficients estimated on the interacted variable are very close to those estimated without country fixed effects, which backs up our interpretation of the previous results.

The main lesson from Table 2 is therefore that product-destination country exports of high-end varieties have a different sensitivity to gravity determinants as compared with lowend variety exports. The most striking result concerns the negative impact of distance whose effect is 90 percent lower for high-end varieties.

One remaining question is whether the effects we find are due to selection effects or whether they are still at work at the firm level. For instance, the higher sales in wealthier markets may be due to higher sales per firm or the selection of relatively larger firms in these markets. To better understand the micro behavior behind our findings, Section 4.2 pursues the analysis at the firm-destination country and firm-product-destination country level.

Firm-Level Analysis

In this section, we evaluate the importance of the gravity determinants introduced in the previous section on the value of exports and the probability of exporting at the firm level. We use firm-destination and firm-product-destination data for the year 2005. In all regressions, we have firm or firm-product fixed effects that capture firm characteristics such as quality, productivity, size, credit constraints etc. The coefficients are thus identified within firms (and products), across destinations.

Intensive margin. Table 3 reports the impact of gravity determinants on the value of firm exports. In the first two columns, we examine firm-destination total exports without tak-ing the product dimension into account. At the firm-destiation level, we find that high-end variety exporters sell relatively more to wealthy countries and are less adversely affected by distance. They also sell more in larger markets, as measured by population. In column (2), we add country fixed effects to account for the price index in the destination country. In this specification, we can only identify the coefficients for the interaction terms. The differences between high-and low-end exporters remain qualitatively and quantitatively the same. In the last two columns, we examine the value of exports at the firm-product-destination level. The results are the same as those at the firm-destination level, but the effect of distance interacted with the high-end variety dummy is no longer significant once country fixed effects are included. This suggests that most of the premium on the sales of high-end variety exporters in more distant markets is due to a composition effect across products. Extensive margin. This section examines the decision of firms to export to a market depending on the different gravity determinants introduced earlier. Table 4 reports the results of linear probability regressions. 28 In the first two columns, we consider the probability of exporting to a country at the firm level. Column (1) reports our baseline regression, and column (2) includes country fixed effects to control for the price index in the destination market. We find that, at the firm level, the probability of exporting is higher in larger and wealthier markets, this positive relationship being even stronger for high-end varieties. The distance to the destination country has a negative impact on the probability of exporting, but this negative effect is significantly dampened for high-end variety exporters. In the last two columns, we analyze the probability of exporting at the firm and product level. High-end variety exporters export relatively more than others in wealthy countries and are more likely to enter more distant markets. The order of magnitude of the coefficients is the same as those at the firm level, though they are a bit lower.

Robustness Checks

Differences between Colbert firms and other high-end exporters. We have identified high-end variety exporters from the list of Colbert firms. To be sure that our effects are not entirely driven by this sub-sample of top-end producers, we present regressions in which we further distinguish between Colbert firms and other high-end variety exporters.

The results are displayed in Table 5. The different specifications are the same as in Tables 2,3, and 4. The first interaction, with HighEnd, gives the premium of non-Colbert high-end variety exports. The second interaction, with Colbert, gives the additional premium of Colbert firms as compared to the other high-end exporters. 29 First, we see that, at the product-variety type-destination level, non-Colbert high-end variety exports do not exhibit a significant premium in terms of sensitivity to per capita income. Colbert exports have a modest premium which is almost significant at the 10% level. This weak effect is the result of a higher sensitivity to per capita income of the sales per firm, compensated by a lower sensitivity of the number of firms. However, within firms, we still find that high-end variety exporters are more likely to serve high-GDP-per-capita countries. Among the set of countries they serve, high-end exporters also sell more in higher-GDP-percapita markets.

The main difference in sensitivity between Colbert and other high-end exporters concerns distance. At the product-variety type-destination level (column 1), the premium is 0.65 for high-end exports, and nearly 0.95 for Colbert exports. Given the benchmark elasticity of distance of 0.79 (Table 2, column 1), this means that distance has virtually no impact (or a positive impact) on the exports by Colbert firms. This lower sensitivity to distance for Colbert firms remains in all specifications. Interestingly enough, the lower sensitivity to distance is mostly explained by the extensive margin for high-end exporters, while both the intensive and the extensive margins are important for the additional premium of Colbert firms. High-end variety or high-productivity exporters? We may wonder what our highend dummy captures exactly. Section 2 provides evidence suggesting that high-end variety exporters are firms which export very expensive, i.e. highly sophisticated or high-quality or high-reputation varieties. One potential concern is that the firms identified as high-end exporters are also high-productivity firms. If this is the case, the higher sensitivity to income or the lower sensitivity to distance may simply be the consequence of a higher level of efficiency.

A first reassuring result is that in the data, high-end exporters do not seem to exhibit a much higher TFP. We have been able to merge a sub-sample of our data with balance sheet data and to compute firm-level labor productivity for these firms firms. The correlation between productivity and the high-end dummy is positive but very small (1.8%), which suggests that productivity is not the key characteristic of high-end variety exporters. 30 Then, we have directly addressed the issue of not taking productivity into account in our baseline regressions. Table 6 reports the results of a regression of the logarithm of exports and the decision to export at the firm-destination level on the gravity variables interacted with both the HighEnd dummy and the logarithm of the labor productivity of firms. Since the sample is different from the one used in Tables 4 and3, columns (1) and (3) show that while the number of observations declines compared with the previous estimates, the coefficients of the variables are very close. Columns ( 2) and ( 4) include the interactions with labor productivity. The coefficients on the interaction between the gravity variables and the high-end dummy are not affected by the introduction of productivity controls. Interestingly enough, if anything, both the value of exports and the probability of exporting decrease more rapidly with distance for high productivity firms. The stability of the results confirms that our high-end dummy captures more than technical efficiency and that the ability of high-end variety firms to export to more distant markets is not due to a higher productivity.

Alternative variables. Table 7 presents the results of alternative specifications.In unreported regressions, we find that the regressions on the value of exports are robust to a Poisson specification in which we account for zeros. In columns (1), (3), ( 5), (7), and ( 9), we ask if the results are robust to the introduction of a measure of income inequality (Gini index). In columns (2), ( 4), ( 6), (8), and (10), we ask if the effect of distance is robust to additional socio-geographic variables such as common border, common language, or former colonial relationship, as standard in the estimation of gravity equations, since these characteristics might be correlated with distance. Comparing Table 7 with Tables 2,3, and 4, we see that introducing the Gini index does not affect the results. Overall, we find that high-end exporters are more likely to export and export more to countries with a higher level of income inequality, though the effect is not significant at the product level.31 This table presents the OLS regressions of the log of exports and LPM regressions of a dummy equal to one if there is a positive export flow to a country and zero otherwise at the firm-destination level on the log of GDP per capita, the log of population, and the log of distance. These variables are interacted with a dummy equal to one if exporters are high-end producers (including firms belonging to the Comité Colbert). In columns 2-4, the variables are also interacted with the log of the labor productivity of firms. The data are for the year 2005. T-stat computed from standard errors clustered at the country level are reported between parentheses. * , * * , and * * * indicate significance at the 10, 5, and 1 percent level.

Turning to other gravity variables, we find that sharing a common border increases less the amount of exports and the probability of exporting for high-end variety exporters. This is consistent with our interpretation that high-end exporters are more geographically diversified, and export more to distant markets. High-end variety exporters also trade relatively less than low-end exporters (the number of firms and the amount of sales per firm) with French-speaking countries. However, they are more likely to enter countries that used to be part of the French colonial empire. We have no good interpretation of these two facts. Importantly enough, introducing these variables does not change our main results. These alternative specifications also confirm that most of the lower sensitivity to distance of high-end varieties is due to the extensive margin.

countries.

Discussion of the Results

Several regularities emerge from the empirical analysis. First, in contrast with the predictions of workhorse models of international trade, per capita income is an important determinant of trade flows. Demand increases with per capita income, and it increases relatively more for high-end varieties. This is in line with the predictions of models featuring non-homothetic preferences. The intensive margin accounts for most of this difference in sensitivity to per capita income. High-and low-end varieties also differ in terms of their sensitivity to distance.

The impact of distance on top-quality exporters is very small. Interestingly enough, most of this lower effect is driven by the extensive margin. High-end variety exporters are more likely to export to more distant markets, while they do not export to many more countries than low-end variety exporters. This suggests that high-end variety exporters are better able to meet their demand in distant markets.

One striking fact highlighted in Section 3 is that low-end variety aggregate exports are markedly less geographically diversified than high-end ones. Using the same big regions as in Figure 2, we find that the Herfindahl index of the geographic concentration of exports is equal to 0.23 for overall high-end variety exports and to 0.45 for low-end variety exports. Using the product-variety type-destination level estimates from Table 2 (col. 1), we compute the predicted value of high-and low-end exports. The implied Herfindahl indices of geographic concentration are very close to the ones observed: 0.24 for high-end, and 0.45 for low-end.

We then ask which determinant between sensitivity to GDP per capita and sensitivity to distance better accounts for this. Assuming that low-end variety exports have the same sensitivity to GDP per capita as high-end variety exports would not affect much the geographic distribution of their sales abroad: if anything, the Herfindahl index would increase slightly from 0.45 to 0.48. However, assuming that they have the same distance elasticity as high-end variety exporters would generate a tremendous geographic diversification of low-end variety exports: the Herfindahl index would decrease in this case from 0.45 to 0.22, and thus become very close to the one calculated for high-end variety exports. The sensitivity to distance thus explains the difference in the geographic distribution of high-end and low-end variety exports almost entirely.

One important question is why high-end variety exports suffer significantly less from distance. As pointed out earlier, this is not due to a composition effect in terms of firms: the median high-end exporter does not enter more markets than the median low-end exporter. The elasticity of exports to distance may vary for three reasons. The first one is that the transportation technology is different. If an increase in the geographical distance has almost no impact on the transportation cost for high-end varieties, then we should not observe a strong impact of distance on high-end exports. The second possibility is that distancerelated costs are negligible as compared to the value of the good. In this case, changes in trade costs should have almost no effect on demand. This is the case if per unit transport costs are additive (Martin, 2012). A last option is that the price-elasticity of demand for high-end varieties is very low. This is the case for instance if demand has a CES form and the elasticity of substitution between high-end varieties is very low as compared with lowend ones. Discriminating between these explanations goes beyond the scope of this paper. Moreover, note that they cannot account for the fact that high-end variety exporters do not export to many more countries than low-end ones. We investigate now in Section 5 the macro implications for export growth and volatility of this peculiar sensitivity to distance and GDP per capita.

Macroeconomic Implications

Volatility of Demand

How does the specialization in high-end varieties impact on output volatility? Looking at the raw data, we find that two opposite effects are at play. First, considering the volatility of exports by destination, we find that high-end variety sales are more volatile than low-end ones. The average country-specific volatility of high-end variety sales reached 0.089 against 0.064 for low-end varieties over the 2000-2006 period. 32 As emphasized in the empirical analysis, highend varieties are more sensitive to changes in per capita income, which explains this pattern. However, the total sales (across countries) of high-end varieties are not more volatile than those of low-end varieties. Actually, over the 2000-2006 period, high-and low-end varieties had the same variance of overall export growth rate, which was equal to 0.036. The difference between country-specific and aggregate volatility might be due to diversification. Since the exports of high-end varieties are more geographically diversified, they are probably subject to fewer correlated shocks, which may in turn reduce their volatility. This should be particularly important when the closest neighbors of a country face highly synchronized income shocks compared to more distant partners.

Diversification and country-specific volatility seem to be two key ingredients of aggregate volatility. We use a simple decomposition of volatility next to assess the magnitude of the two effects. We further evaluate the relative importance of the differences in terms of distanceelasticity and income-elasticity of exports to explain our results. For a given product, the volatility of demand is simply the volatility of the weighted average of demand growth in each country, where the weights are the shares of each country in the total exports of the product. Formally, we have:

V olatility = V ar( ∆x t x t-1 ) = V ar( i w i,t-1 ∆x i,t x i,t-1 )
where x t is the demand for product x at date t and w i,t is the share of country i in the 32 The volatility of sales in a country is simply the variance of the growth rate of exports to this country.

total exports of product x. We can rearrange the equation to make the volatility of countrylevel demand growth appear. Actually, the volatility is equal to the weighted average of the variances of demand growth in each country, and the weighted average of the comovement of demand growth for each possible country pair. This gives the following equation:

V olatility = i w 2 i,t-1 V ar( ∆x i,t x i,t-1 ) + i,j w j,t-1 w i,t-1 Cov( ∆x i,t x i,t-1 , ∆x j,t x j,t-1 )
For the sake of simplicity, we assume that changes in demand in a country ( ∆x i,t

x i,t-1 ) only depend on the growth of the GDP per capita. We assume that the elasticity of demand to GDP per capita is

∆x i,t x i,t-1 = ( ∆GDP c i,t
GDP c i,t-1 )α. We estimate the elasticity α by regressing the product-variety type-destination-year value of exports over the 2000-2006 period on GDP per capita, population and product-variety-country fixed effects. The elasticity is thus estimated in the time dimension. We estimate two elasticities, the first one for high-end varieties, the second one for low-end varieties. The estimated elasticities are 0.5 and 0.3 respectively.

We then ask what the volatility of low-end varieties would be if they had the sensitivity to GDP per capita changes of high-end varieties. In this exercise, we play with ∆x i,t

x i,t-1 only. We find that keeping w s constant, a change in the sensitivity of demand to changes in GDP per capita would increase the volatility of low-end products by 57 percent. This highlights how volatile high-end varieties would be if they had the same geography (same w) as low-end varieties.

Our second experiment concerns the geography of exports which is incorporated in the w s. Instead of computing the volatility from the observed weights, we predict the weights based on our previous regressions. First, we compute the volatility of demand of low-end varieties from weights predicted by assuming that low-end varieties have the same elasticity to distance as high-end varieties. To do so, we use product-variety type-destination country level estimates presented in Table 2 (col. 1). Then, we do a similar exercise by computing the weight of each destination country in low-end variety exports in the case of a sensitivity to per capita income equal to that of high-end varieties. In both cases, our decomposition allows us to explore which part of the difference in volatility is driven by the weighted country-specific volatility, and which part is due to the covariance term.

We find that if low-end varieties had the same sensitivity to distance as high-end varieties, their volatility would decrease by 18 percent. This confirms the intuition that high-end variety exports are less volatile thanks to their geographic diversification. What is more, we find that 5/6 of the decrease in volatility comes from the covariance. If low-end varieties were less sensitive to distance, they would allocate a greater share of their exports to countries with fewer correlated demand shocks.

By contrast, if low-end varieties had the sensitivity to GDP per capita of high-end varieties, the geography of their exports would not be modified deeply. The change in the geography of low-end variety exports would lead to a tiny increase in volatility of 0.06 percent.

These two thought experiments illustrate the impact of a specialization of countries in high-end varieties on the sources of volatility. The most trivial effect is an increase in volatility due to the relatively higher sensitivity of high-end variety exports to demand shocks. The second effect is linked to geography. Since high-end varieties are less sensitive to distance, their exports are more geographically diversified. If countries are hit by different shocks, being geographically diversified smoothes these shocks and reduces volatility. This is what happened between 2000 and 2006. It is worth emphasizing that if all the countries face the same shock, then diversification is useless and only the first direct effect is at play.

Market Shares and Demand Growth

While our analysis has been mainly static so far, the important geographic reshuffling observed over the past ten years, in particular toward Eastern Asia, suggests that high-end variety exporters are better able than low-end variety exporters to follow demand in a globalized world.

To test this idea more formally, we compute the annual share of each country in overall high-and low-end variety exports from 2000 to 2010. We do the same with predicted values of exports, and with fictitious values of low-end variety exports, assuming that they have the same GDP per capita or distance elasticity as high-end variety exports. 33 We then investigate how these shares change over time with the average GDP per capita growth rate over the preceding 5 years in the different destination countries. More precisely, we run the following regression: share kct = αgdpc growth ct-5,t +βhigh-end+γgdpc growth ct-5,t ×high-end+µ kc +η t + kct (2) where share kct is the share of country c in overall exports of variety type k at time t, gdpc growth ct-5,t is the annual average growth rate of GDP per capita in country c from t -5 to t, high-end is a dummy identifying high-end variety exports and µ kc and η t are country-variety type and time fixed effects, kct being an i.i.d. disturbance term.

If high-end variety exporters are better able to adapt to changes in the geographic distribution of demand across the world, γ should be positive and significant, whether market shares are calculated with observed exports or predicted exports. In other words, we expect the correlation between country shares and past GDP per capita growth to be stronger for high-end varieties. If sensitivity to distance is the main explanation for this, we expect γ to be close to zero and insignificant when the market shares of low-end variety exports are computed assuming the same distance elasticity for both types of variety. Note that the last decade is an ideal period for such a test, since the locus of demand growth changed considerably over this period, with the rise, in particular, of Eastern Asia.

The results in Table 8 go in this direction. The share which a country represents in overall exports of high-and low-end varieties at time t tends to increase with annual GDP per capita growth over the preceding 5 years, and this positive correlation is stronger for high-end variety exports. While assuming the same GDP per capita elasticity for both types of variety does not affect the analysis significantly, any difference vanishes as soon as low-end variety exports are assumed to have the same sensitivity to distance as high-end variety exports.

These results clearly show that a lower sensitivity to distance makes high-end variety exporters better able to take advantage of new business opportunities across the world.

Conclusion

This paper explores the macroeconomic implications of a specialization of developed countries in high-end varieties. The papers follows three steps. First, we build a new data set that disentangles high-and low-end variety exports, thanks to an original methodology that exploits information on exports by firms from the French luxury industry. Second, we examine the difference in the sensitivity of high-and low-end variety exports to several determinants including per capita income, distance, population, and income distribution. Third, we run counter-factual exercises based on these estimates to assess the consequences for the growth and volatility of French high-end variety exports.

We find that specializing in high-end varieties has two opposite effects on volatility. On the one hand, the country-specific demand is more volatile due to the higher sensitivity of highend varieties to income shocks. On the other hand, high-end variety exports are less sensitive to distance which leads to a greater geographic diversification of exports, and volatility is thus reduced. We find that the two effects counterbalanced each other almost exactly in France for the 2000-2006 period. The lower sensitivity to distance also facilitates the entry and sales of high-end variety exporters in distant but growing markets. In our data, the geographic diversification of high-end variety exports has allowed these exporters to reap the gains from

Figure 1 :

 1 Figure 1: Share of high-end variety exports and value of exports

Figure 3 :

 3 Figure 3: Portfolio scope of high-and low-end variety exporters -Cumulative distributions

Figure 4 :Figure 5 :

 45 Figure 4: Distribution of firm-level exports of high-and low-end variety exporters

  firm-prod-dest firm-dest firm-prod-dest the regressions of the log of exported values or the decision to export for year 2005 on the log of GDP per capita, the log of population, and the log of distance. These variables are interacted with a dummy equal to one if exporters are high-end producers (including firms belonging to the Comité Colbert), and a second dummy equal to one if firms are members of the Comité Colbert. Columns 1-2-3 present regressions at the product level. Columns 4-6 present regressions at the firm level. Columns 5-7 present regressions at the firm-product level. The data are for the year 2005. T-stat computed from standard errors clustered at the country level are reported between parentheses. * , * * , and * * * indicate significance at the 10, 5, and 1 percent level.

Figure A- 1 :

 1 Figure A-1: Distribution of firm-level unit values

Table 1 :

 1 Price Premium of High-End Variety Exporters

	Industry	Share of high-end exporters	Price premium
		(% of the total # of exporters in the ind.)
	Miscellaneous	5.8	3.8 * * *
	Beverages	20.1	2.9 * * *
	Food	5.4	2.9 * * *
	Apparel and footwear	7.2	2.8 * * *
	Leather goods	8.1	2.2 * * *
	Home art	11.4	2.2 * * *
	Cosmetics	14.1	2.2 * * *
	Jewels	22.9	1.8 * * *
	Clocks	12.7	1.6 * * *
	Textile	5.2	1.6 * * *
	Paper -books	8.4	1.4

* * *

The exponential of coefficients are obtained thanks to OLS regressions on unit values including hs6 product-country-year fixed effects. * , * * , and * * * indicate significance at the 10, 5, and 1 percent level. The table reads as follows: the clocks exported by high-end variety exporters are on average 1.6 times more expensive than the clocks exported by other firms.

Table 2 :

 2 Table 2 reports our results, decomposing the total exports Determinants of Exports for High-and Low-End Varieties

	Dimensions		Product Category, High-end/Low-end, Destination
		(1)	(2)	(3)	(4)	(5)	(6)
		Exports	# firms	X/firm	Exports	# firms	X/firm
	GDP/cap (log)	0.628 * * *	0.430 * * * 0.197 * * *	-	-	-
		(7.358)	(7.256)	(4.519)	-	-	-
	-× HighEnd	0.242 * * *	-0.001	0.243 * * * 0.161 * * *	-0.048	0.208 * * *
		(4.282)	(-0.036)	(5.659)	(3.223)	(-1.508)	(5.251)
	Pop. (log)	0.595 * * *	0.281 * * * 0.313 * * *	-	-	-
		(9.942)	(7.533)	(7.272)	-	-	-
	-× HighEnd	0.016	-0.060 * *	0.076 * *	-0.020	-0.085 * * *	0.066 * *
		(0.384)	(-2.496)	(2.584)	(-0.490)	(-4.143)	(2.037)
	Distance (log)	-0.791 * * * -0.703 * * *	-0.088	-	-	-
		(-7.477) (-10.823) (-1.449)	-	-	-
	-× HighEnd	0.713 * * *	0.492 * * * 0.221 * * * 0.754 * * * 0.517 * * *	0.237 * * *
		(8.533)	(11.103)	(3.764)	(9.029)	(12.336)	(4.009)
	Observations	17,837	17,837	17,837	17,837	17,837	15,799
	R 2	0.324	0.494	0.144	0.636	0.767	0.488
	Product-HighEnd	Yes	Yes	Yes	Yes	Yes	Yes
	Country FE	No	No	No	Yes	Yes	Yes

This table presents product-variety type-destination country level regressions of the log of exported values (col. 1-4), the number of exporting firms (col.2-5), and the average value of exports per firm (col. 3-6) on the log of GDP per capita, the log of population, and the log of distance. These variables are interacted with a dummy equal to one for high-end variety trade flows (including varieties exported by the Comité Colbert). The data are for the year 2005. T-stat computed from standard errors clustered at the country level are reported between parentheses. * , * * , and * * * indicate significance at the 10, 5, and 1 percent level.

Table 3 :

 3 Intensive Margin, High-and Low-End Variety Exporters This table presents the regressions of the log of exported values at the firm level (col. 1-2) and at the firm-product level (col. 4) on the log of GDP per capita, the log of population, and the log of distance. These variables are interacted with a dummy equal to one if exporters are high-end producers (including firms belonging to the Comité Colbert). The data are for the year 2005. T-stat computed from standard errors clustered at the country level are reported between parentheses. * , * * , and * * * indicate significance at the 10, 5, and 1 percent level.

	Dep. variable		Exports (log)
	Dimensions	Firm-(Product), High-/Low-end, Dest.
		(1)	(2)	(3)	(4)
	GDP/cap (log)	0.280 * * *	-	0.275 * * *	-
		(32.355)	-	(22.795)	-
	-× HighEnd	0.248 * * * 0.219 * * * 0.303 * * *	0.277 * * *
		(10.251)	(8.257)	(8.391)	(7.026)
	POP. (log)	0.297 * * *	-	0.330 * * *	-
		(66.333)	-	(46.420)	-
	-× HighEnd	0.057 * * * 0.064 * * * 0.071 * * *	0.106 * * *
		(5.192)	(5.191)	(4.460)	(6.044)
	Distance (log)	-0.227 * * *	-	-0.176 * * *	-
		(-28.121)	-	(-16.680)	-
	-× HighEnd	0.131 * * * 0.095 * * * 0.133 * * *	0.023
		(6.973)	(4.578)	(5.846)	(0.903)
	Observations	144,497	144,497	329,595	329,595
	R-squared	0.089	0.539	0.096	0.696
	Firm F.E.	Yes	Yes	No	No
	Firm-Product F.E.	No	No	Yes	Yes
	Country F.E.	No	Yes	No	Yes

Table 4 :

 4 Extensive Margin, High-and Low-End Variety Exporters This table presents the LPM regressions of the a dummy equal to one if there is a positive export flow to a country and zero otherwise at the firm level (col. 1-2-3) and at the firm-product level (col. 4-5-6) on the log of GDP per capita, the log of population, and the log of distance. These variables are interacted with a dummy equal to one if exporters are high-end producers (including firms belonging to the Comité Colbert). The data are for the year 2005. T-stat computed from standard errors clustered at the country level are reported between parentheses. * , * * , and * * * indicate significance at the 10, 5, and 1 percent level.

	Dep. variable		Export Status
	Dimensions	Firm-(Product), High-/Low-end, Dest.
		(1)	(2)	(3)	(4)
	GDP/cap (log)	0.031 * * *	-	0.021 * * *	-
		(109.960)	-	(77.619)	-
	-× HighEnd	0.016 * * *	0.016 * * *	0.016 * * *	0.013 * * *
		(17.241)	(17.137)	(12.287)	(9.554)
	POP. (log)	0.022 * * *	-	0.016 * * *	-
		(129.939)	-	(90.798)	-
	-× HighEnd	0.007 * * *	0.007 * * *	0.007 * * *	0.006 * * *
		(13.517)	(13.436)	(10.107)	(7.852)
	Distance (log)	-0.040 * * *	-	-0.036 * * *	-
		(-102.871)	-	(-67.682)	-
	-× HighEnd	0.018 * * *	0.018 * * *	0.014 * * *	0.010 * * *
		(16.982)	(16.881)	(8.849)	(6.278)
	Observations	2,295,340 2,268,336 8,055,432	8,055,432
	R-squared	0.000	0.079	0.067	0.228
	Firm F.E.	Yes	Yes	No	No
	Firm-Product F.E.	No	No	Yes	Yes
	Country F.E.	No	Yes	No	Yes

Table 5 :

 5 Determinants of Exports for Colbert Firms, and High-and Low-End Varieties

Table 6 :

 6 High-End Variety Exporters and Productivity

	Dep. variable	Exports (log)	Decision to export
	Dimensions		Firm, High-end/Low-end, Destination
		(1)	(2)	(3)	(4)
	GDPc × HighEnd 0.200 * * * 0.187 * * * 0.016 * * *	0.015 * * *
		(6.299)	(5.993)	(8.982)	(9.280)
	Dist. × HighEnd	0.093 * * * 0.098 * * * 0.010 * * *	0.010 * * *
		(3.731)	(3.927)	(4.984)	(5.493)
	Pop. × HighEnd	0.085 * * * 0.081 * * * 0.010 * * *	0.010 * * *
		(6.049)	(5.816)	(9.931)	(10.429)
	GDPc × TFP		0.317 * * *		0.010 * * *
			(5.390)		(4.656)
	Dist.× TFP		-0.088 *		-0.015 * * *
			(-1.728)		(-5.665)
	Pop.× TFP		0.116 * * *		0.005 * * *
			(4.718)		(3.356)
	Observations	100,700 100,700 6,104,028	6,104,028
	R-squared	0,534	0,534	0,205	0,206
	Firm F.E.	Yes	Yes	Yes	Yes
	Country F.E.	Yes	Yes	Yes	Yes

Table 7 :

 7 Other Gravity Determinants, Firm-Level Regressions

  This table presents product-, firm-and firm-product-level regressions with alternative gravity variables. In columns 1 and 2, the explained variable has a product-country dimension. In columns 3-4-7-8, the explained variables have a firm-country dimension. In columns 4-5-9-10, the explained variables have a firm-product-country dimension. All regressions include individual fixed effects. T-stat computed from standard errors clustered at the country level are reported between parentheses.

	(-2.171)	138,538 144,497 329,595 328,926 1,782,264 2,268,336 6,329,268 8,055,432	0.544 0.539 0.696	No Yes Yes Yes Yes No	indicate significance at the 10, 5, and 1 percent level.
		17,837	0.768		, * * , and * * *
		15,799	0.651
		Observations	R-squared

*

Table 8 :

 8 Market Shares and Demand GrowthStandard errors clustered at the country level are reported between parentheses. * , * * , and * * * indicate significance at the 10, 5, and 1 percent level.

	Dependent variable:

Table A -

 A 4: Sectorial Composition of High-End Variety Exports 2000-2011

	Industry	All firms
	Cosmetics		30.4
	Beverages		27.4
	Leather goods		19.0
	Jewels			9.0
	Apparel and footwear	6.8
	Home art		3.3
	Paper, books		1.9
	Food			0.9
	Miscellaneous		0.4
	Textile			0.4
	Clocks			0.3
	Total			100
	A-2 Figures
	.5
	.4
	.3
	Freq.
	.2
	.1
	0
	10	5	0	5	10
		Demeaned unit value
		Clocks		Beverages
		Articles of leather

The Comité Colbert organizes shows and exhibitions and develops lobbying activities for the luxury industry. See http://www.comitecolbert.com/. There are 76 members, including brands as famous and expensive as Baccarat, Cartier, Champagne Bollinger, Chanel, Christian Dior, Hermès, Louis Vuitton or Yves Saint-Laurent

.5 We are not the only one to use information from the Comité Colbert to study high-end variety exports. In a related paper,[START_REF] Fontagné | European High-End Products in International Competition[END_REF] use this information to identify high-end varieties in European country and product-level data. Both our focus and our methodology differ from[START_REF] Fontagné | European High-End Products in International Competition[END_REF]: we focus on heterogeneity across firms in terms of variety-type within a country, while they focus on such a heterogeneity across

countries.6 We show that the high-end variety exporters we identify sell high-priced varieties in the same quantity as low-end variety exporters, confirming the specific appeal of their products for consumers. Moreover, we manually verify that the twenty biggest high-end variety exporters do belong the the French luxury industry. Finally, for the Champagne exporters, we compare our data set with the exogenous rating used in[START_REF] Crozet | Quality sorting and trade: Firm-level evidence for French wine[END_REF]. We find that most of the top-quality producers in their data set are identified as high-end producers of champagne in ours.

This identification number is called the "SIREN number".

8-digit product of the combined nomenclature

From 2000 to 2005, the observations for which the information on the volume of exports is missing represented slightly more than 1% of total exports in value; this share rose to almost 4% in 2006 and to over 30% afterwards.

 12 Actually, for intra-EU exports, this threshold was equal to 38,000 euros in 2000, 100,000 euros from 2001 to 2006, 150,000 euros from 2006 to 2011, and 460,000 euros in 2011. For extra-EU exports, firms exporting less than 1,000 euros and 1,000 kg in total did not have to declare their activities until 2009; after this date, all the export flows were recorded. Since it is well known that small exporters account for a very small share of overall exports, we believe that these threshold changes do not affect the analysis we conduct in this paper.

At the notable exception of Bugatti.

Their hs6 codes are respectively 491000, 700991 and 700992.

Product database available upon request.

See Cagé and Rouzet (2013) for a study of the interplay of reputation and quality in an international trade context.

To avoid the noise introduced by small importing countries, we also restrict the sample to the 85 most important destination countries for firms active in the hs6 products featuring high-end varieties. These countries account for 99% of the overall French exports for these products.

We use the first quartile as a threshold in order to avoid the potential noise brought by outliers. The results are unaffected when using less conservative definitions.

We have tried different thresholds, both for the identification of high-end variety firm-hs6 product pairs

EU27, other European countries, Community of Independent States (CIS), North America, South America, Maghreb and the Middle East, other African countries, Japan, Eastern Asia, Pacific and other Asian countries.

Note that the idea that high-end varieties are partly produced by niche producers is reminiscent of a recent work byHolmes and Stevens (2010), who find on US data that within industries, small plants specialize in custom varieties , while big plants produce standardized ones.

Since in this case, the relative price of high-quality varieties decreases with distance.

We also tried GNI per capita instead of GDP per capita. The results are the same.

We also ran logit regressions. The results (available upon request) are qualitatively the same.

Technically, this means that HighEnd is equal to 1 for both Colbert and other high-end exporters, while the dummy Colbert is equal to 1 for Colbert firms only.

When running a logit estimation to explain the high-end dummy by productivity, the estimated coefficient is positive and significant , but the pseudo R 2 of the regression is only equal to 0.004.

The impact of the Gini index is significant for the value of export at the firm-level but not at the firmproduct level. This suggests that not every product of high-end variety firms is more exported to more unequal

We use the coefficients obtained from the same regression as in Table2.

This paper has benefited from the financial support of the group "Mondialisation et Développement" (GMonD) from the Paris School of Economics (PSE), and of the Belgian French-speaking Community (Convention ARC No No Yes Yes No No Firm-Prod FE No No No No Yes Yes No No Yes Yes Destination FE No No Yes Yes No

the growth in remote countries, in particular in Eastern Asia.

Appendix

A-1 Tables Table A-