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Imports versus Domestic Production: A Demand System Analysis of the U.S. Red Wine Market

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Author Info

  • James L. Seale
  • Mary A. Marchant
  • Alberto Basso

Abstract

The U.S. wine market experienced rapid growth in all facets—production, consumption, exports, and imports—over the past decade. Red wine imports more than tripled while consumption of domestically produced red wines doubled. This research estimates demand elasticities of U.S. red wine imports from five countries accounting for over 90% of imports—Italy, France, Spain, Australia, and Chile—using the first-difference version of the almost ideal demand system (AIDS). These elasticities are compared with those for domestically produced red wine. Results for conditional expenditure elasticities indicate that the U.S. red wine industry gains over imports when U.S. consumers’ total expenditures on red wine increase. However, comparing own- and cross-price elasticities reveals an increase in the price of U.S. red wine results in a decline in quantity demanded six times greater than for French and Italian red wines and over 20 times greater than other import countries, thus harming the U.S. red wine industry. Empirical results suggest that U.S. red-wine producers could increase their total revenue by decreasing prices, while Italian and French producers can increase total revenues by increasing them. Copyright 2003, Oxford University Press.

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File URL: http://hdl.handle.net/10.1111/1467-9353.00053
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Bibliographic Info

Article provided by Agricultural and Applied Economics Association in its journal Review of Agricultural Economics.

Volume (Year): 25 (2003)
Issue (Month): 1 ()
Pages: 187-202

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Handle: RePEc:oup:revage:v:25:y:2003:i:1:p:187-202

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Cited by:
  1. Muhammad, Andrew & Jones, Keithly G., 2009. "An Assessment Of Dynamic Behavior In The U.S. Catfish Market: An Application Of The Generalized Dynamic Rotterdam Model," 2009 Annual Meeting, January 31-February 3, 2009, Atlanta, Georgia 45912, Southern Agricultural Economics Association.
  2. Marette, Stephan & Zago, Angelo M., 2003. "Advertising, Collective Action, And Labeling In The European Wine Markets," Journal of Food Distribution Research, Food Distribution Research Society, vol. 34(03), November.
  3. Castellon, Cesar E. & Boonsaeng, Tullaya & Carpio, Carlos E., 2012. "Demand System Estimation in the Absence of Price Data: an Application of Stone-Lewbel Price Indices," 2012 Annual Meeting, August 12-14, 2012, Seattle, Washington 124819, Agricultural and Applied Economics Association.
  4. Lee, Young-Jae & Kennedy, P. Lynn & Hilbun, Brian M., 2010. "Implicit Price And Demand In Oligopolistic Competition: An Application To The U.S. Trout Market," 2010 Annual Meeting, July 25-27, 2010, Denver, Colorado 60824, Agricultural and Applied Economics Association.
  5. Seccia, Antonio & Nardone, Gianluca & Stasi, Antonio, 2008. "Analisi del mercato Italiano del vino Syrah
    [Analysis of Italian Market of Syrah Wine]    ," MPRA Paper 14665, University Library of Munich, Germany, revised 15 Mar 2009.
  6. Harri, Ardian & Muhammad, Andrew & Anderson, John D., 2008. "Estimating a Demand System with Seasonally Differenced Data," 2008 Annual Meeting, July 27-29, 2008, Orlando, Florida 6427, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
  7. Lee, Young-Jae & Kennedy, P. Lynn & Hilbun, Brian M., 2008. "Import Demand System Analysis Of The South Korean Wine Market With The Source Differentated Aids Model," 2008 Annual Meeting, July 27-29, 2008, Orlando, Florida 6345, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
  8. Okrent, Abigail M. & Alston, Julian M., 2012. "The Demand for Disaggregated Food-Away-from-Home and Food-at-Home Products in the United States," Economic Research Report 132469, United States Department of Agriculture, Economic Research Service.

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