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Wine export demand shocks and wine tax reform in Australia: Regional consequences using an economy-wide approach

Author

Listed:
  • Kym Anderson

    () (School of Economics, University of Adelaide, Australia)

  • Ernesto Valenzuela

    () (School of Economics, University of Adelaide, Australia)

Abstract

We provide economy-wide modeling results of the national and regional implications of two current challenges facing the Australian wine industry: a decline in export demand for premium wines, and a possible change in the tax on domestic wine sales following the Henry Review of Taxation. The demand shock causes regional GDP to fall in the cool and warm wine regions but not in the hot wine regions unless the shock is large. A change from the current ad valorem tax to a similarly low volumetric tax on domestic wine sales causes regional GDP to rise in the cool and warm wine regions, partly offsetting its fall due to the export demand shock; but GDP in the hot wine regions would fall substantially. The switch to a volumetric tax as high as the standard beer rate would raise tax revenue and lower domestic wine consumption by more than one-third, but would induce a one-third decrease in production of non-premium wine as its consumer price would rise by at least three-quarters (while the average price of super premium wines would change very little), hence exacerbating the difference in effects of a tax reform on hot versus warm and cool wine regionsÂ’ GDP.

Suggested Citation

  • Kym Anderson & Ernesto Valenzuela, 2010. "Wine export demand shocks and wine tax reform in Australia: Regional consequences using an economy-wide approach," Wine Economics Research Centre Working Papers 2010-02, University of Adelaide, Wine Economics Research Centre.
  • Handle: RePEc:adl:winewp:2010-02
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    File URL: http://www.adelaide.edu.au/wine-econ/papers/0210_Wine_regional_shock_modeling_0210.pdf
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    References listed on IDEAS

    as
    1. Preety Srivastava & Xueyan Zhao, 2010. "What Do the Bingers Drink? Microeconometric Evidence on Negative Externatilities of Alcohol Consumption by Beverage Types," Monash Econometrics and Business Statistics Working Papers 1/10, Monash University, Department of Econometrics and Business Statistics.
    2. Kym Anderson & Signe Nelgen & Ernesto Valenzuela & Glyn Wittwer, 2009. "Economic contributions and characteristics of grapes and wine in AustraliaÂ’s wine regions," Centre for International Economic Studies Working Papers 2009-01, University of Adelaide, Centre for International Economic Studies.
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    Cited by:

    1. Kym Anderson, 2010. "Excise and Import Taxes on Wine vs Beer and Spirits: An International Comparison," Wine Economics Research Centre Working Papers 2010-05, University of Adelaide, Wine Economics Research Centre.
    2. Kym Anderson, 2010. "The New World in Globalizing Wine Markets: Lessons from Australia," Wine Economics Research Centre Working Papers 2010-09, University of Adelaide, Wine Economics Research Centre.
    3. Kym Anderson, 2010. "Excise and Import Taxes on Wine Versus Beer and Spirits: An International Comparison," Economic Papers, The Economic Society of Australia, vol. 29(2), pages 215-228, June.

    More about this item

    Keywords

    Wine export demand; Wine consumer taxation; Regional economy-wide modeling;

    JEL classification:

    • D58 - Microeconomics - - General Equilibrium and Disequilibrium - - - Computable and Other Applied General Equilibrium Models
    • F18 - International Economics - - Trade - - - Trade and Environment
    • H22 - Public Economics - - Taxation, Subsidies, and Revenue - - - Incidence
    • Q18 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Policy; Food Policy
    • R13 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - General Equilibrium and Welfare Economic Analysis of Regional Economies

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