Studies on International Trade and Niche Products

March 2017  The Tequila Puzzle: The large surge of small Tequila distilleries after the enactment of NAFTA

We study the impact of trade liberalization on the change in size distribution of Tequila producers and we test four possible explanations for this change. Using the Melitz (2003) model as a baseline and the evolution of the Bourbon and Tennessee Whiskey Industries after NAFTA,  we reject all four hypotheses. In particular, we do not find evidence to presume that Denomination of Origin is a trade policy that can promote the creation of small producers. I am developing this project together with Tim Kehoe and Pau Pujolas.