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JWE-Articles
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Journal of Wine Economics Volume 17 | 2022 | No. 4
»
The impact of direct to consumer shipping laws on the number and size distribution of U.S. wineries

The impact of direct to consumer shipping laws on the number and size distribution of U.S. wineries

Matthew T. Pesavento
JEL Clasification: H73; K29; L11; L43
Pages: 270-295
Full Text PDF
Abstract

The changing legislative landscape of the U.S. wine market provides a scenario to examine the effect of regulation on the size distribution of firms. Using the variation across states and time in the sum of in-state and out-of-state adult populations between 2002–2017, and a difference in difference-style empirical model, I examine how restrictions on Direct to Consumer (DTC) sales impact the number of establishments and the employ- ment at wineries. I find that the expansion of the potential wine market by 10 M adults caused about a 3.5% increase in the number of wineries. While reduced DTC restrictions explain growth in the number of wineries, I find no effect of lessened restrictions on the number of winery employees, though there is evidence of a lagged effect. Additionally, I find that the growth of smaller wineries substantially outpaces that of larger wineries when regulations are lessened. These results suggest that regulatory barriers in particular indus- tries may allow states to maintain an artificial size distribution.

Keywords: direct to consumer; DTC; employment; regulation; size; wine

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