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A SAM-Based Analysis of the Economic Impact of Frauds in the Italian Wine Value Chain

Author

Listed:
  • Donato Romano

    (Università degli Studi di Firenze)

  • Benedetto Rocchi

    (Università degli Studi di Firenze)

  • Ahmad Sadiddin

    (Food and Agricultural Organization of the United Nations)

  • Gianluca Stefani

    (Università degli Studi di Firenze)

  • Raffaella Zucaro

    (Consiglio per la Ricerca in Agricoltura e l’Analisi dell’Economia Agraria, Centro Politiche e Bioeconomia (CREA-PB))

  • Veronica Manganiello

    (Consiglio per la Ricerca in Agricoltura e l’Analisi dell’Economia Agraria, Centro Politiche e Bioeconomia (CREA-PB))

Abstract

The objective of this paper is twofold: firstly, it analyzes the evolution of frauds in the Italian wine value chain over the period 2007–2015, and then, using a properly disaggregated social accounting matrix (SAM) of the Italian economy, it simulates the impact of wine frauds on the national economy in terms of growth, employment, value added and income. The wine industry is the sector most exposed to frauds within the Italian agro-food system accounting for 88% of total value of seized agro-food outputs. Most irregularities (95%) are made by only three agents, specifically individual wineries, bottlers-wholesalers and retailers. We estimated industry-specific SAM multipliers to assess the share of the Italian economy depending on irregular wine production. These activities account for 11.5% of specialized permanent crop farms output and over 25% of wine industry output. This is a sign of vulnerability of the wine industry: should a food scandal/scare determine a drop in consumers’ demand, the negative effect on production activities of these sectors may be large. The SAM was also used to perform an impact analysis adopting a counterfactual approach. Results show a slightly positive increase of value added (6 million euro) along with an overall decrease in the activity level (an output loss of 406 million euro and more than six thousand full time jobs lost). This contractionary effect can be explained with fraud rents. Indeed, the extra-profits from frauds do not activate the economy circular flow as most of them leak out to exogenous accounts such as the public administration and the rest of the world.

Suggested Citation

  • Donato Romano & Benedetto Rocchi & Ahmad Sadiddin & Gianluca Stefani & Raffaella Zucaro & Veronica Manganiello, 2021. "A SAM-Based Analysis of the Economic Impact of Frauds in the Italian Wine Value Chain," Italian Economic Journal: A Continuation of Rivista Italiana degli Economisti and Giornale degli Economisti, Springer;Società Italiana degli Economisti (Italian Economic Association), vol. 7(2), pages 297-321, July.
    • Handle: RePEc:spr:italej:v:7:y:2021:i:2:d:10.1007_s40797-020-00137-w
    DOI: 10.1007/s40797-020-00137-w
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    References listed on IDEAS

    as
    1. Bhagwati, Jagdish N, 1982. "Directly Unproductive, Profit-seeking (DUP) Activities," Journal of Political Economy, University of Chicago Press, vol. 90(5), pages 988-1002, October.
    2. Benedetto Rocchi & Donato Romano & Ahmad Sadiddin & Gianluca Stefani, 2020. "Assessing the economy‐wide impact of food fraud: A SAM‐based counterfactual approach," Agribusiness, John Wiley & Sons, Ltd., vol. 36(2), pages 167-191, April.
    3. David W. Roland‐Holst & Ferran Sancho, 1992. "Relative Income Determination In The United States: A Social Accounting Perspective," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 38(3), pages 311-327, September.
    4. Simonetta Mazzarino & Alessandro Corsi, 2015. "I flussi dell?uva verso la vinificazione: un?analisi comparata per regioni e macroaree," Economia agro-alimentare, FrancoAngeli Editore, vol. 17(1), pages 29-58.
    5. Jeffrey Round, 2003. "Constructing SAMs for Development Policy Analysis: Lessons Learned and Challenges Ahead," Economic Systems Research, Taylor & Francis Journals, vol. 15(2), pages 161-183.
    6. Krueger, Anne O, 1974. "The Political Economy of the Rent-Seeking Society," American Economic Review, American Economic Association, vol. 64(3), pages 291-303, June.
    7. Giovanni Anania & Rosanna Nisticò, 2004. "Public Regulation as a Substitute for Trust in Quality Food Markets: What if the Trust Substitute cannot be Fully Trusted?," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 160(4), pages 681-701, December.
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    Cited by:

    1. Anna Carbone, 2021. "From Flasks to Fine Glasses: Recent Trends in Wine Economics," Italian Economic Journal: A Continuation of Rivista Italiana degli Economisti and Giornale degli Economisti, Springer;Società Italiana degli Economisti (Italian Economic Association), vol. 7(2), pages 187-198, July.

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    More about this item

    Keywords

    Food frauds; Wine; Social accounting matrix; Italy;
    All these keywords.

    JEL classification:

    • E16 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Social Accounting Matrix
    • E17 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Forecasting and Simulation: Models and Applications
    • L66 - Industrial Organization - - Industry Studies: Manufacturing - - - Food; Beverages; Cosmetics; Tobacco
    • Q13 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Markets and Marketing; Cooperatives; Agribusiness
    • Q18 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Policy; Food Policy; Animal Welfare Policy

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