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Working Paper No. 96

Published: 2011
Category:
Business

The Role of Temporary Involvement with Appellation of Origin in the Purchase of Wine

Carmen Rodríguez-Santos & Klaus Grunert
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Abstract
Studying the involvement variable is key to explaining consumer behaviour. The aim of the current research is to analyse the effect that the individual’s temporary involvement with the appellation of origin has on the process of the decision to purchase agro-food products. It is proposed and confirmed a measurement of the consumer’s temporary involvement by three properties defining its cognitive base: number of associated values, centrality of these values and intensity of the relation. To examine the influence of the temporary involvement, we consider the cognitive, affective and behavioural responses that make up the decision process. Here, the analysis focuses on the product category of wine.

Working Paper No. 95

Published: 2011
Category:
Economics

Regulating the availability of beer, wine, and spirits in grocery stores: Beverage-specific effects on prices, consumption, and traffic fatalities

Bradley J. Rickard, Marco Costanigro & Teevrat Garg
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Abstract
The availability of beer, wine, and spirits in grocery stores varies across the United States due to state-level regulations. Recently there have been a number of controversial legislative proposals to expand the distribution of certain alcoholic beverages, notably wine. Here we estimate how grocery store alcohol availability affects the prices and consumption of different types of alcohol. Then, changes in total alcohol consumption and the relative shares of beer, wine, and spirits are linked to traffic fatalities. While states with higher levels of total alcohol consumption have higher traffic fatality rates, econometric results show that the type of alcoholic beverage consumed is also relevant. Holding constant the total quantity of alcohol consumed, a higher share of wine correlates with lower traffic fatality rates, while the opposite is true for beer. Spirits are more strongly associated to traffic fatalities than wine, but less than beer. These findings suggest that the ethanol alcohol content in beverages is not a good indicator of its relative impact on traffic fatalities, and arguments against the wider distribution of wine as a way to reduce social problems may not be fully justified.

Working Paper No. 94

Published: 2011
Category:
Economics

Influence of product assortment on the efficiency of grape-growing family farms in Macedonia1 – DEA approach

Gordana Manevska-Tasevska
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Abstract
The influence of grape assortment in terms of assortment size and product function/product consistency on the technical efficiency of grape-growing family farms in Macedonia was analyzed. A two-stage Data Envelopment Analysis (DEA) method extended with bootstrapping was applied to the three-year average (2006-2008) of a panel dataset for 300 farms. In the first stage, output-orientated ordinary DEA and bias- corrected technical efficiency scores accompanied with confidence intervals were obtained. In the second stage, the impact of grape assortment characteristics on the efficiency scores obtained was assessed. The analysis revealed very high potential for revenue increases. Farmers with lower variety diversification, specializing in growing local and regional varieties and table grape varieties, achieved higher efficiency. Thus the ongoing revitalization and investments in Macedonian grape assortment should primarily be directed towards regionally recognized and table grape varieties. Grape variety diversification is generally not recommended.

Working Paper No. 93

Published: 2011
Category:
Economics

A Meta-Analysis of Geographical Indication Food Valuation Studies. What Drives the Premium for Origin Based Labels?

Oana Deselnicu, Marco Costanigro, Diogo M. Souza-Monteiro & Dawn Thilmany McFadden
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Abstract
Geographical indications (GI) have become a common mean of product differentiation in food markets, and a vast number of studies have estimated the price premium captured by specific GI products. We collected 30 valuation studies conducted across the globe, compiling a total of 183 estimates of GI premia for wine, cheese, coffee, meat, produce, olive oil and grain products.
The average premium is 13.3%, with a rather large standard deviation (24.59%). We show that models accounting for product characteristics and institutional framework (PDO, PGI, trademarks) can explain a large portion of this variance. GIs capture the highest percentage premium in markets for products with short supply chains and relatively low added value (e.g. fresh produce), while premia are lower for wine and olive oil, where alternative means of product differentiation (e.g. branding) exist. Controlling for product characteristics, GIs adopting stricter regulations (PDO) yield larger premia than less regulated ones (PGI).

Working Paper No. 92

Published: 2011
Category:
Business

Motivations and Characteristics of International Wine Bloggers

J. Freitas Santos
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Abstract
The worldwide emergence of blogs (or weblogs) has presented marketers with a new communication channel. In the wine industry little is understood about wine blogging practices and motivations. This exploratory study examines the profile, motivations and several technical and marketing features of international wine bloggers. In general, the findings suggest that international wine bloggers are a niche community, relatively young and dynamic in the world of blogs. They tended to blog for self-promotion rather than diversion, using WordPress platform, Google analytics counter and Creative Commons licence. Furthermore, this study indicates the minor role of advertisement and the practice of rating wines as a strategy to increase the profitability of the blog.

Working Paper No. 91

Published: 2011
Category:
Economics

The buyer’s dilemma – To whose rating should a wine drinker pay attention?

Omer Gokcekus & Dennis Nottebaum
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Abstract
A wine buyer is faced with a multitude of often diverging expert reviews and ratings of one and the same wine. In this article we attempt to shed light on the question to whose rating a regular buyer should pay attention. We do so by comparing the taste of regular consumers, captured by community tasting notes to the expert ratings of Robert Parker, the Wine Spectator and Stephen Tanzer. We find that for a randomly selected sample of 120 2005 Bordeaux wines Stephen Tanzer’s scores are most closely associated with the community ratings; and more interestingly, compared to expert ratings, average price paid for a bottle of wine is more highly correlated with median community score. The latter finding possibly confirms the “acquired taste” of experts, but may also be explained by cognitive dissonance.

Working Paper No. 90

Published: 2011
Category:
Economics

Competitive Exclusion with Heterogeneous Sellers: The Case of State Wine Shipping Laws

Jerry Ellig & Alan Wiseman
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Abstract
Several states impede direct-to-consumer wine shipment from out-of-state sellers by excluding out-of-state retailers from direct shipment or by enacting production caps that prevent direct shipment of wines from wineries with annual production above a designated number of gallons. We explore the economic effects of these two barriers to competition by combining new data on winery prices and production with price data employed in previously-published research. Principal findings include: (1) Direct shipment by out-of-state wineries is sufficient to maximize the variety of wines available to consumers. (2) Excluding online retailers from direct shipment deprives consumers of access to significant online price savings and reduces competitive pressure on local wine merchants by reducing the number of wines for which online savings are available. (3) Low production caps in the 20,000-30,000 gallon range are tantamount to a ban on direct shipment of the wines in our sample. Higher production caps of 150,000-250,000 gallons allow direct shipment of wines with significant online price savings but, paradoxically, prevent direct shipment of the wines most likely to induce price-cutting by offline stores. (4) Combining exclusion of retailers with a production cap can either be redundant or more restrictive than either policy alone, depending on the level of the cap.

Working Paper No. 89

Published: 2011
Category:
Business

The Wine Industry in British Columbia: Issues and Potential

Andy Hira & Alexis Bwenge
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Abstract
The analysis in this report is structured around a theoretical framework I have developed for the larger comparative project- that industry competitiveness depends on policies that guide: markets, institutions, networks, and supply chains. We apply the framework to the British Columbia (BC) Canada wine industry, with an emphasis on the area with the greatest concentration, the Okanagan Valley (OKV). Our approach focuses on the potential role of public and collective support institutions to promote industry competitiveness in clusters. By clusters, we mean geographically concentrated producers in the same industry. I take an evolutionary view of the role of such institutions, reflecting my recent work that a successful public-private partnership requires continual adaptation to changes in markets (Hira, forthcoming). I therefore completely reject the false dichotomy that prevails that either markets (private companies) or states (governments) determine economic success. Productive public-private interactions are fundamental to successful industries. The analysis in this report strongly reinforces this point- to be successful BC needed and will need public-private partnerships that are responsive, flexible, and pro-active.

Working Paper No. 88

Published: 2011
Category:
Economics

A CARE-less Rush to Regulate Alcohol: Wholesalers’ Attempt to Secure Regulatory Fiefdoms

Angela Logomasini
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Abstract
As Constitution framer James Madison warned, special-interest politics never cease. “The latent causes of factions,” he said, are “sown in the nature of man.” Without measures to control them, overbearing majorities or politically connected minorities would trample the rights of everyone else—taking property and destroying prosperity. The key was to set up a system of checks and balances to keep factions—today known as special interests—under control. Recent efforts by beer, wine, and spirit wholesalers show that Madison’s concerns remain relevant today.
Wholesalers have a long history of leveraging their position within the industry, employing state laws to secure a guaranteed slice of the market. However, recent court cases have challenged some of these anticompetitive state laws. Accordingly, the wholesalers’ Washington, D.C., lobbyists are turning to Congress to pass federal legislation that undermines the free market and constitutional principles in order to serve their narrow special interest. Their effort is embodied in a bill offered by Rep. Jason Chaffetz (R-UT), the Community Alcohol Regulatory Effectiveness (CARE) Act (H.R. 1161).
At the heart of this debate is wholesalers’ desire to maintain a government-enforced three-tier system for distributing alcoholic beverages. This system, present in nearly all states, requires alcohol producers—wineries, distillers, brewers—and importers to sell only to wholesalers, who in turn are the only source from which retailers may purchase their inventory. Most states—with notable exceptions such as California and Washington, D.C. — also ban “vertical integration,” preventing any single company from owning and operating businesses in more than one tier.
In many states, franchise laws—which depend on a three-tier system—also play a big role in alcohol distribution. Once a producer selects a wholesaler, it must abide by terms and conditions set in state franchise laws that grant legal and competitive advantages to wholesalers. Most franchise laws are written to make it extremely difficult and expensive for a producer to terminate the agreement. Many also require “brand exclusivity,” which prevents producers from hiring more than one firm within a designated area—either a state or local region—to compete in finding retail buyers for a product. Legally enforced brand monopolies and the inability to terminate contracts for non-performance make it extremely difficult for small-scale wineries, breweries, and distilleries to get their products to retailers, because wholesalers have little desire to market specialty products. These producers must focus on selling their products via their tasting rooms, direct-to-consumer shipping, or both, where it is allowed.
The three-tier system, along with franchise laws, promotes a highly localized, territory- based wine marketing system—which ultimately amounts to a system of fiefdoms. Accordingly, when policy change becomes a threat to the system, wholesalers turn to the government for help. The CARE Act is the wholesalers’ latest attempt to solidify their position.
To that end, H.R. 1161 would allow states to pass laws that impede commerce as long as they do not “intentionally or facially discriminate against out-of-state or out-of-territory producers of alcoholic beverages in favor of in-state or in-territory producers unless the State or territory can demonstrate that the challenged law advances a legitimate local purpose that cannot be adequately served by reasonable nondiscriminatory alternatives.”
Should H.R. 1161 be approved, the courts might allow states to impose discriminatory laws against out-of-state wineries, but only if the state can argue that the impact is not intentionally protectionist. In any case, since the limited protections in H.R. 1161 apply only to producers, the bill would unleash an unbridled number of state-level protectionist policies affecting anyone else in the industry. Such laws will undermine sales of any domestic winery or importer whose brands are marketed via online retailers. It also might prevent direct shipping from producers who rent winemaking facilities because many states classify them as either retailers or distributors rather than producers. This blatantly unfair treatment may destroy many small entrepreneurial businesses, leaving fewer outlets through which wineries can reach consumers.
The wholesalers’ ultimate goal with such legislation is to limit the amount of wine and spirit sales that skip the wholesaler tier and deprive them of profits. For example, states like California allow retailers to buy directly from wineries in-state and even outside the U.S. If California retailers are free to ship these wines to consumers around the nation, wholesalers do not earn profits from those sales. By tying the hands of retailers and importers to ship interstate, wholesalers can block such competition. But the desire to avoid competition does not make a compelling political argument, which is why wholesalers claim to be guardians of the Constitution and states’ rights.
The wholesalers’ use of constitutional arguments is particularly ironic because James Madison specifically designed the Constitution to ward off such special-interest politics. In Federalist Number 10, Madison explained that the “principal task” of government is to control “factions” such as special-interest groups from trampling the rights of others.
Accordingly, Madison and the other framers advocated a form of government that would balance powers and employ checks and balances to limit opportunities for overbearing special interests to undermine liberty. The federal commerce power—which wholesalers want to overcome—is one of the many checks in the system. The debate over the CARE Act epitomizes the concerns that Madison had about the unwieldy and dangerous threat that special interests would always pose toward liberty. It is nothing more than a special-interest attempt to game the system to advantage one segment of the alcohol industry at the expense of everyone else.

Working Paper No. 87

Published: 2011
Category:
Economics

World Wine Exports: What Determines the Success of ‘New World’ Wine Producers?

Osiris Jorge Parcero & Emiliano Villanueva
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Abstract
By using an econometric approach this paper looks at the evolution of the world wine industry in the period 1961-2005. A particular stylized fact is the appearance of non- traditional producing and exporting countries of wine from the beginning of the nineties. We show that the success of these new producing and exporting countries can be explained by the importance of the demand from non-producing countries with little or no tradition of wine consumption, relative to the world demand. This stylized fact is consistent with a testable implication of the switching cost literature and to the best of our knowledge this is the first time that this implication is tested.

Working Paper No. 86

Published: 2011
Category:
Economics

Does the bottle size matter? An investigation into differences between posted and market prices

J. François Outreville
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Abstract
What determines wine prices? The question is obviously not new but the most recent papers dealing with this subject tend to go beyond a simple competitive market where the prices are the result of supply and demand. There is more than the price of wine in a bottle. The decision to market wine in a different bottle size is considered to have more to do with the judgment of taste and the feeling of pleasure than other factors. Does size matter? In this short paper we investigate the relationship between price and the size of the bottle for the same wine. We find that in the case of Champagne, the posted price of wine increases more than proportionally with the size of the bottle. However, this result does not fully hold for Bordeaux wines when we consider auction prices for large bottles.

Working Paper No. 85

Published: 2011
Category:
Economics

Wine Economics: Emergence, Developments, Topics

Karl Storchmann
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Abstract
Humans have cultivated vines for the production of wine for thousands of years. According to Unwin (1991), the origins of viticulture lie in the region between the Black Sea and the Caspian Sea and date back to the year 4000 BC, possibly even 6000 BC. There are few products that can look back to such a long history while the production process has remained more or less unchanged.
Accordingly, over the last millennia, a large body of viticultural and enological literature has accumulated. Early examples date more than 2,000 years back (Robinson, 2006). The Roman statesman, Marcus Cato, also known as Cato the Elder (234-149 BC), in his book “De agri cultura,” provides detailed practical advice how to profitably run a wine farm. Among other topics, he stresses that grapes should be fully ripe when harvested and all vats need to be perfectly clean to prevent wine from turning into vinegar. Another Roman, Lucius Columella, discusses many technical aspects of Roman viticulture in his treatise on farming “De re rustica” (60 AD). In two books, he elaborates on topics such as what grape variety grows best on what soil type. He lays out many elements of modern vine training and trellising. For instance, he recommends a vine spacing of a double-pace (about 1.50m), vines to be trained on chestnut stakes as high as a man and willow shoots to fasten the vines (a natural fastener that is still being used in the Mosel valley).
Economists have taken notice of wine and the vine as well. Adam Smith, David Ricardo, John Stuart Mill, Karl Marx or Leon Walras, all wrote, to some extent, about wine (see, e.g., Chaikind, 2010). Although these early writings are on topics such as the value of vineyard land or trade, they mostly touch wine only in passing or refer to it as an example. In addition, these references are too scattered over more than a century that they can constitute wine economics as an independent economic discipline.
Wine economics as a discipline that analyzes wine-related issues as its main focus entered the scene much later. Over the last two decades, wine economics has emerged as growing field not only within agricultural economics but in adjacent fields such as finance, trade, growth, and environmental economics as well. There are several academic associations that are devoted to furthering the economics of wine. At the annual conferences of the largest one of them, the American Association of Wine Economics (AAWE), more than 200 wine economists from all over the world regularly meet and present the results of their research.2 Since 2006, and in addition to the agricultural economics journals, there has been an academic journal entirely devoted to wine and economics, the Journal of Wine Economics.3 Furthermore, wine economics research has been increasingly recognized by general economics journals as well.
In what respect is wine different from milk, coffee, tea or beer? This paper wants to sketch the emergence of wine economics and recent developments in the economics literature. Furthermore, I want to shed some light on the three main research issues of wine economics: wine as an investment, environmental issues and the role of experts. The remainder of this paper is organized as follows. In Section 2, I provide some data on the development of wine in the scholarly literature over the last decades. Section 3 describes the emergence of wine economics. The central topics of wine economics are introduced in Section 4, 5 and 6. Section 7 concludes and provides an outlook.

Working Paper No. 84

Published: 2011
Category:
Business

Innovation in Wine SMES: The Portuguese Douro Boys

Dorli Muhr & João Rebelo
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Abstract
Globalization is challenging the very core of organizations and firms’ strategies in the traditional European wine regions characterized by a terroir orientation, whose context shows that their wine small and medium enterprises (SME), are probably unwilling and unable to produce large and low-cost, standardised quantities of wine, with the sales supported by heavy marketing campaigns. The main aim of this paper is to present a business strategy that can be adopted for wine SME located in regions with high production costs and where tradition and terroir are relevant factors, to be introduced in the decision process. To achieve this goal, it is presented the case of five small wine producer-bottlers, located in the Portuguese conservative Douro Demarcated Region (DDR), that are developing an innovative approach through the adoption of an informal horizontal network nominated Douro Boys. The analysis conducted in this work allows us to conclude that we are in the presence of a very simple and informal structure of prospectors, with a high culture of innovation, searching niches in international wine markets.

Working Paper No. 83

Published: 2011
Category:
Business

The Douro Wine Region: A cluster approach

João Rebelo & José Caldas
Full Text PDF
Abstract
Globalization is challenging the core business of wine industry, especially in traditional European producers’ countries, like Portugal, characterized by a terroir model, i.e., an economic structure supported by a large number of grape-growers, small and medium wine firms and high public regulation, to compete in international markets. Using a cluster approach, this paper presents the case of the most important Portuguese wine region, the Demarcated Douro Region (DDR), which is a strong reference of terroir and known for producing Port wine. To increase its competitiveness in the world wine market, the DDR needs to evolve from an organized to an innovative cluster.

Working Paper No. 82

Published: 2011
Category:
Economics

Splendide Mendax: False Label Claims about High and Rising Alcohol Content of Wine

Julian M. Alston, Kate B. Fuller, James T. Lapsley, George Soleas & Kabir P. Tumber
Full Text PDF
Abstract
Many economists and others are interested in the phenomenon of rising alcohol content of wine and its potential causes. Has the alcohol content of wine risen—and if so, by how much, where, and when? What roles have been played by climate change and other environmental factors compared with evolving consumer preferences and expert ratings? In this paper we explore these questions using international evidence, combining time-series data on the alcohol content of wine from a large number of countries that experienced different patterns of climate change and influences of policy and demand shifts. We also examine the relationship between the actual alcohol content of wine and the alcohol content stated on the label. The systematic patterns here suggest that rising alcohol content of wine may be a nuisance by-product of producer responses to perceived market preferences for wines having riper, more-intense flavours, possibly in conjunction with evolving climate.

Working Paper No. 81

Published: 2011
Category:
Economics

Learning by Cooking and Reputation Building: A French Recipe to Become a Top Chef

Olivier Gergaud, Valerie Smeets & Frederic Warzynski
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Abstract
In this paper, we analyze the careers from a sample of more than 1,000 top French chefs over more than twenty years and link it to the success or reputation of the restaurants where they have worked. This allows us to test what are the determinants of success but also to investigate the dynamics of performance and reputation, stress- ing the importance of the quality of apprenticeship, mentoring and entrepreneurship spirit. We find that the prestige of the restaurant where individuals work is on average declining along the career, and that the quality of apprenticeship is strongly related to the future success as chef.

Working Paper No. 80

Published: 2011
Category:
Economics

The Effects of Alcohol Policies in Reducing Entry Rates and Time Spent in Foster Care

Sara Markowitz, Alison Cuellar, Ryan M. Conrad & Michael Grossman
Full Text PDF
Abstract
The purpose of this paper is to empirically estimate the propensity for alcohol-related policies to influence rates of entry into foster care and the length of time spent in foster care. Alcohol consumption is believed to be major contributing factor to child maltreatment, associated with an increased likelihood of abuse and longer durations once in foster care. We analyze a panel of state-level foster care entry rates over time, followed by a duration analysis of individual-level cases. The alcohol regulations of interest include beer, wine, and liquor taxes and prices, and a measure of alcohol availability. Overall, these alcohol control policies appear to have limited power to alter foster care entry rates and duration once in care. We find that higher alcohol taxes and prices are not effective in reducing foster care entry rates, however, once in foster care, the duration of stay may be influenced with higher taxes, particularly when the entry was a result of an alcohol abusing parent.

Working Paper No. 79

Published: 2011
Category:
Economics

Beer Drinking Nations – The Determinants of Global Beer Consumption

Liesbeth Colen & Johan Swinnen
Full Text PDF
Abstract

In this paper we analyze the evolution of beer consumption between countries and over time. Historically, there have been major changes in beer consumption in the world. In recent times, per capita consumption has decreased in traditional “beer drinking nations” while it increased strongly in emerging economies. Recently, China has overtaken the US as the largest beer economy. A quantitative empirical analysis shows that the relationship between income and beer consumption has an inverse U-shape. Beer consumption initially increases with rising incomes, but at higher levels of income beer consumption falls. Increased openness to trade and globalization has contributed to a convergence in alcohol consumption patterns across countries. In countries that were originally “beer drinking nations”, the share of beer in total alcohol consumption reduced while this is not the case in countries which traditionally drank mostly wine or spirits. Climatic conditions, religion, and relative prices also influence beer consumption.

Working Paper No. 78

Published: 2011
Category:
Economics

Infrequency of Purchase, Individual Heterogeneity and Rational Addiction in Single Households’ Estimates of Alcohol Consumption

Pierpaolo Pierani & Silvia Tiezzi
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Abstract
A panel of Italian single households is used to test for rational addiction in alcohol consumption. These monthly consumption data raise problems of measurement errors and unobservable heterogeneity. To deal with the zeros in the dependent variable we adopt a specification based on infrequency of purchase. GMM estimators are used to deal with errors in variables and unobserved heterogeneity. There is evidence that alcohol consumers are actually forward-looking. Past consumption is also significant in explaining current consumption thus detecting the addictive nature of alcohol. Discount rates, the strength of addiction, short and long run price and income elasticities are significant and in line with the theoretical predictions. These results and the inclusion of a number of demographic and geographic characters deliver valuable information for public policy purposes and suggest significant differences driven by individual heterogeneity.

Working Paper No. 77

Published: 2011
Category:
Business

Inter-Firm Networks in the European wine Industry

Fabrizio Cafaggi & Paola Iamiceli
Full Text PDF
Abstract
In the last twenty years the European wine market has been confronted with major changes at the economic and the regulatory levels. The emergence of new producing countries has significantly increased the amount of competition, reinforcing the global dimension of the wine market. This has happened in a context where the overall drop in wine consumption is only partially compensated by commercial access to new markets in the Far East and Africa. Between 2000 and 2006, the level of global wine exports increased by 31% in terms of volume, and 75% in terms of value, which also attests to the improvement in quality of the wine being traded1. The largest exporters globally are Italy, France, Australia and Spain; and, within Europe, Italy, France and Spain, followed by Germany and Portugal2.
The dynamics of international trade evidence the good performance of Italy and, especially, Australia, which in the period 2000-2006 increased its exports by 1.4% and 2.8% respectively in terms of value (by 0.4% and 3.9% in terms of volume). However, it was France that registered the worst performance (a decline of 6.4% in terms of quantity, and 5.4% in terms of value).
The more recent dynamics from 2008 show the slowdown of growth in the export of wine worldwide3. Among the European countries, only Spain and, marginally, Germany increased the amount of wine exported. The United States remains the largest importer of European wine both in terms of quantity and quality4. Other important trends in commercial trade concern the slowdown of growth in wine exported by the New World (Australia, Chile, New Zealand and South Africa), and the increase in the bulk wine traded globally and bottled in the countries in which it is distributed5.
The increased competition has not only put more pressure on traditional producers but they have also been confronted with new competitive dynamics: these are not particularly focused on territorial advantage, but are oriented particularly towards trademarks and brand-based development strategies.
Relationships between production and distribution, and the transformation of channels have changed in the last 10 years also due to the widespread use of online selling. The emergence of specialised distribution companies as well as the increasing role of large distribution chains in food and drinks markets reflect these changes, but also have redesigned the wine value chain requiring profound changes, in particular: a more stringent coordination between production and distribution; reallocating power and value along the chain for the benefit of those enterprises able to control access to the retail markets. This is a global phenomenon, significantly influenced by the increasing concentration of distribution enterprises in Europe and throughout the world.
The recent economic crisis has put additional pressure on competitive dynamics, favouring a reallocation of value in favour of the parts of the wine chain oriented towards medium price demand rather than niche production.
Within this scenario, the recent European reform of the Common Market Organisation of Wine has tried to enhance the competitiveness of the European wine market by searching for an adequate balance among the preservation of territorial competitive advantages, enhancement of innovation production processes, market transparency and consumer protection6. The European wine industry is still primarily based on denominations of origins, which are self or co-regulated regimes.
The private organizations entrusted with regulatory power concerning compliance with D.O. requirements and other safety requirements constitute large regulatory blocs which influence the formation of networks among firms belonging to the same D.O. The protection of collective reputation requires peer monitoring since when a single producer violates quality requirements it is likely that all the producers within the DO will suffer damage. Furthermore, the success of individual entrepreneurs within a D.O. may generate positive externalities on the other producers increasing both the price of wine and the value of land.
The European wine market also shows high fragmentation in terms of land ownership and the size of enterprises operating in the sector, in particular regarding grape-growers and wine producers. The average size of vineyards in Italy is 1.5 ha, in France is 8.8 ha, in Portugal is 1.2 ha, in Spain 5.9 ha and in Hungary 0.5 ha7.
Family businesses are still the main commercial model, at least at the production level, and grapes production is often a part-time activity for land owners8. At the land ownership level, the European policy on grubbing-up has partially influenced this fragmentation, favouring the reduction of production potential. At least in principle the expiry of this policy in the near future might bring new changes in ownership allocation and size of enterprises.
Reducing effective capacity to access innovation processes, knowledge-based services, trademarks development strategies, and internationalisation patterns, the small size of enterprises does not help them in facing the current global competition. A move towards vertical integration can be observed at some levels, partially directed to expanding control over land, but more intensively directed to expanding control over trademarks and access to markets. These growth strategies are not easily accessible for all the enterprises (and have been pursued mostly by distributors or final producers), and are deeply influenced by the regulatory context at the national level related to land use regulation, mergers and acquisitions, and corporate groups. Some special changes have taken place in Eastern Europe, where, though within legal constraints, some limited concentration of production firms was triggered by foreign penetration, and by the transfer in the control over ex-State-owned enterprises.
A different response to entrepreneurial fragmentation can be seen in inter-firm collaboration This has not occurred so much in the area of market-type relations, as spot relations mostly driven by price dynamics, but more so in the area of intensively collaborative relations, which have mostly been driven by knowledge-based investments, the pooling of complementary strategic resources, and fiduciary ties. The path towards inter-firm collaboration is not without obstacles: these include governance issues concerning the provision of adequate incentives for cooperation in a context in which independent firms might continue to compete at some level, and to cooperate at other levels. However, the opportunity for sharing critical resources, enabling innovation processes which would otherwise be inaccessible, might represent a very important competitive advantage in the current scenario. This paper explores the conditions and the factors influencing these collaborative dynamics both at the domestic and the European levels.

Working Paper No. 76

Published: 2011
Category:
Economics

How does the Business Cycle Affect eating Habits?

Dhaval M. Dave & Inas Rashad Kelly
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Abstract
As economic expansions raise employment and wages, associated shifts in income and time constraints would be expected to also impact individuals’ health. This study utilizes information from the Behavioral Risk Factor Surveillance System (1990-2007) to explore the relationship between the risk of unemployment and the consumption of various healthy and unhealthy foods. Estimates, based on fixed effects methodologies, indicate that a higher risk of unemployment is associated with reduced consumption of fruits and vegetables and increased consumption of “unhealthy” foods such as snacks and fast food. In addition to estimation of the average population effect, heterogeneous responses are also identified through detailed sample stratifications and by isolating the effect for those predicted to be at highest risk of unemployment based on their socioeconomic characteristics. Among individuals predicted to be at highest risk of being unemployed, a one percentage point increase in the resident state’s unemployment rate is associated with a 2-8% reduction in the consumption of fruits and vegetables. The impact is somewhat higher among married individuals and older adults. Supplementary analyses also explore specific mediating pathways, and point to reduced family income and adverse mental health as significant channels underlying the procyclical nature of healthy food consumption.

Working Paper No. 75

Published: 2010
Category:
Economics

Women or Wine ? Monogamy and Alcohol

Mara Squicciarini & Jo Swinnen
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Abstract

Intriguingly, across the world the main social groups which practice polygyny do not consume alcohol. We investigate whether there is a correlation between alcohol consumption and polygynous/monogamous arrangements, both over time and across cultures. Historically, we find a correlation between the shift from polygyny to monogamy and the growth of alcohol consumption. Cross-culturally we also find that monogamous societies consume more alcohol than polygynous societies in the pre- industrial world. We provide a series of possible explanations to explain the positive correlation between monogamy and alcohol consumption over time and across societies.

Working Paper No. 74

Published: 2010
Category:
Economics

The Role of Viticulture and Enology in the Development of Economic Thought: How Wine Contributed to Modern Economic Theory

Stephen Chaikind
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Abstract

The importance of wine grapes as an agricultural product and of wine as a commodity quickly becomes evident to those reading through the history of economic thought. Well known examples by Adam Smith and David Ricardo come to mind. Yet on closer examination, wine‟s ubiquitous presence throughout civilized history has served as the basis, catalyst and example in the development of numerous economic concepts. The prominence of wine as a central factor in economic thought pre-dates the modern era and continues to the present day.
This paper introduces the proximity of wine in the development of a broad swatch of economic thought. Rather than proceed chronologically, Adam Smith will serve as an anchor in this search, followed by thoughts on wine economics from his antecedents, contemporaries and those who follow. The focus is on an examination of documented sources that link wine, its viticulture, enology and marketing to economic theories, models, analysis and practice.

Working Paper No. 73

Published: 2010
Category:
Economics

Collective Reputation Effects: An Empirical Appraisal

Olivier Gergaud & Florine Livat
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Abstract

This paper is an attempt to shed some empirical light on image linkages that exist between a collective umbrella brand and its related individual components. To tackle this issue, we estimate an interaction model in which a single collective reputation both determines and is determined by a series of individual reputations à la Tirole (1996).
From an application to Bordeaux wines using detailed survey data collected in seven European countries, we get positive and significant spillover effects from the umbrella reputation (Bordeaux) which are found to increase with the individual reputation level of the wine. Controlling for the natural endogeneity of collective reputation in this setup, allows to capture the important fact that this relationship is faced with marginal diminishing returns. In other words that the marginal impact of Bordeaux as an umbrella brand actually tends to decrease to zero (and not to increase in a linear way) as the reputation level of its entities goes up. These spillover effects, when significantly positive, vary from a minimum of 5% to a maximum of 15% of addi- tional favorable quality opinions.

Working Paper No. 72

Published: 2010
Category:
Business

Origin, Grape Variety or Packaging? Analyzing the Buying Decision for Wine with a Conjoint Experiment

Gergely Szolnoki, Roland Herrmann & Dieter Hoffmann
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Abstract
The purpose of this paper is to analyse the influence of the identification1 and the packaging of bottled wines on the consumer decision. A case study is conducted in order to quantify the weight of determinants of wine purchase such as origin and variety, i.e. the identification factor, bottle shape, bottle colours and label style (elements of packaging). The analysis of the relative importance of these factors is based on conjoint measurement. A real buying decision without tasting the wine is simulated and conjoint analysis is applied to measure the utility of wine characteristics. The results show that wine packaging has a significant impact on the buying decision. Furthermore, it can be stated that the influence of the exterior product design differs strongly across customer segments.

Working Paper No. 71

Published: 2010
Category:
Economics

Does Drinking Impair College Performance? Evidence from a Regression Discontinuity Approach

Scott E. Carrell, Mark Hoekstra & James E. West
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Abstract
This paper examines the effect of alcohol consumption on student achievement. To do so, we exploit the discontinuity in drinking at age 21 at a college in which the minimum legal drinking age is strictly enforced. We find that drinking causes significant reductions in academic performance, particularly for the highest-performing students. This suggests that the negative consequences of alcohol consumption extend beyond the narrow segment of the population at risk of more severe, low-frequency, outcomes.

Working Paper No. 70

Published: 2010
Category:
Economics

Return to wine: A comparison of the hedonic, repeat sales, and hybrid approaches

James J. Fogarty & Callum Jones
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Abstract
Comparisons between the return to wine and standard financial assets are complicated in that the return to wine must be estimated from infrequent sales of heterogeneous wine brands. Wine returns can be estimated using several different approaches, and here the performance of the hedonic approach, repeat sales approach, and hybrid approach are compared using 14,102 auction sale observations for Australian wine over the period 1988 to 2000. For the data set considered the results show that the hybrid approach provides the most efficient estimates, and that the repeat sales approach provides significantly higher total return estimates than the other two approaches. The portfolio diversification benefit attributed to holding wine is then shown to vary with estimation method.

Working Paper No. 69

Published: 2010
Category:
Economics

Public Monopoly and Economic Efficiency: Evidence from the Pennsylvania Liquor Control Board’s Entry Decisions

Katja Seim & Joel Waldfogel
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Abstract
While private monopolists are generally assumed to maximize profits, the goals of public enterprises are less well known. Using the example of Pennsylvania’s state liquor retailing monopoly, we use information on store location choices, prices, wholesale costs, and sales to uncover the goals implicit in its entry decisions. Does it seek to maximize profits or welfare? We estimate a spatial model of demand for liquor that allows us to calculate counterfactual configurations of stores that maximize profit and welfare. We find that welfare maximizing networks have roughly twice as many stores as would maximize profit. Moreover, the actual network is much more similar in size and configuration to the welfare maximizing configuration. An alternative to a state monopoly would be the common practice of regulated private entry. While such regimes can give rise to inefficient location decisions, little is known about the size of the resulting inefficiencies. Even for a given number of stores, a simple characterization of free entry with our model results in a store configuration that produces welfare losses of between 3 and 9% of revenue. This is a third to half of the overall loss from unregulated free entry.

Working Paper No. 68

Published: 2010
Category:
Economics

inge Drinking & Sex in High School

Jeffrey S. DeSimone
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Abstract
This paper estimates the impact of binge drinking on sexual activity among a nationally representative set of high school students during the 1990s and 2000s. The main innovations are explicitly controlling for time-invariant preferences regarding sexual behavior and alcohol use, and eliminating non-drinkers from the comparison group. I find that binge drinking significantly increases participation in sex, promiscuity, and the failure to use birth control, albeit by amounts considerably smaller than implied by merely conditioning on exogenous factors. For all outcomes, impacts rise substantially with binge drinking frequency. Results are similar using alternative comparison groups defined by excluding those who do not exhibit other risky behaviors, and by gender and race/ethnicity, but vary by grade level and over time in different ways for engaging in sex than protective behavior. Effects are much larger for the small fraction of students that has not been taught about
AIDS/HIV infection in school.

Working Paper No. 67

Published: 2010
Category:
Economics

Fraternity Membership & Frequent Drinking

Jeffrey DeSimone
Full Text PDF
Abstract
Reinforcing earlier findings from other data, college senior fraternity/sorority members are more likely to consume alcohol frequently. Large reductions in estimates upon controlling for time spent partying, and to a lesser extent cigarette use and intramural sports involvement, suggest considerable unobserved heterogeneity in the relationship. Yet, effects remain substantive and are invariant to conditioning on numerous further measures of socializing, sports participation, academic performance and mental health. The conclusion holds when non-member comparison groups are restricted to drinkers who smoke, party and/or play intramurals, or matched to members based on drinking propensities, suggesting that
fraternity/sorority membership raises alcohol use frequency.
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