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Economic Geography Of The U.S. Wine Industry

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  • Canning, Patrick
  • Perez, Agnes C.

Abstract

This study examines wine trade in the United States to assess the impact of higher energy costs on the average distance of world and U.S. regional wine shipments, or wine miles, to U.S. markets. To examine this issue we calibrate a spatial equilibrium model of the U.S. wine industry. The model accounts for (i) consumer preferences for variety, (ii) monopolistic-competition/increasing-returns in the production of differentiated wine products, and (iii) transportation costs. Wine production areas are grouped into nine U.S. and seven world producing regions. U.S. markets are grouped into the 50 States plus the District of Columbia. Results indicate that U.S. consumers are willing to pay substantial transportation costs in order to consume a wide variety of wines from premier U.S. and world wine growing regions. As increasing energy costs drive up the price of freight services, wine mile impacts are limited by the degree of regional product differentiation in U.S. and world producing regions.

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Bibliographic Info

Paper provided by American Association of Wine Economists in its series Working Papers with number 43891.

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Date of creation: Sep 2008
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Handle: RePEc:ags:aawewp:43891

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Web page: http://www.wine-economics.org
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Related research

Keywords: Demand and Price Analysis; Environmental Economics and Policy; Resource /Energy Economics and Policy;

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  1. Krugman, Paul, 1991. "Increasing Returns and Economic Geography," Journal of Political Economy, University of Chicago Press, vol. 99(3), pages 483-99, June.
  2. Stigler, George J & Becker, Gary S, 1977. "De Gustibus Non Est Disputandum," American Economic Review, American Economic Association, vol. 67(2), pages 76-90, March.
  3. Dixit, Avinash K & Stiglitz, Joseph E, 1975. "Monopolistic Competition and Optimum Product Diversity," The Warwick Economics Research Paper Series (TWERPS) 64, University of Warwick, Department of Economics.
  4. repec:fth:michin:324 is not listed on IDEAS
  5. Paul Krugman, 1998. "Space: The Final Frontier," Journal of Economic Perspectives, American Economic Association, vol. 12(2), pages 161-174, Spring.
  6. Lindall, Scott A. & Olson, Douglas C. & Alward, Gregory S., 2006. "Deriving Multi-Regional Models Using the IMPLAN National Trade Flows Model," Journal of Regional Analysis and Policy, Mid-Continent Regional Science Association, vol. 36(1).
  7. Patrick Canning & Zhi Wang, 2005. "A Flexible Mathematical Programming Model to Estimate Interregional Input-Output Accounts," Journal of Regional Science, Wiley Blackwell, vol. 45(3), pages 539-563.
  8. Hummels, D. & Levinsohn, J., 1993. "Product Differentiation as a Source of Comparative Advantage?," Working Papers 324, Research Seminar in International Economics, University of Michigan.
  9. Anderson, James E, 1979. "A Theoretical Foundation for the Gravity Equation," American Economic Review, American Economic Association, vol. 69(1), pages 106-16, March.
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