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Economic Geography Of The U.S. Wine Industry

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  • Canning, Patrick N.
  • 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.

Suggested Citation

  • Canning, Patrick N. & Perez, Agnes C., 2008. "Economic Geography Of The U.S. Wine Industry," Working Papers 43891, American Association of Wine Economists.
    • Handle: RePEc:ags:aawewp:43891
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    References listed on IDEAS

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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 483-499, June.
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    4. 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.
    5. Dixit, Avinash K & Stiglitz, Joseph E, 1977. "Monopolistic Competition and Optimum Product Diversity," American Economic Review, American Economic Association, vol. 67(3), pages 297-308, June.
    6. Paul Krugman, 1998. "Space: The Final Frontier," Journal of Economic Perspectives, American Economic Association, vol. 12(2), pages 161-174, Spring.
    7. 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.
    8. Anderson, James E, 1979. "A Theoretical Foundation for the Gravity Equation," American Economic Review, American Economic Association, vol. 69(1), pages 106-116, March.
    9. 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).
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    Cited by:

    1. Lucia Baldi & Massimo Peri & Daniela Vandone, 2013. "Investing in the wine market: a country-level threshold cointegration approach," Quantitative Finance, Taylor & Francis Journals, vol. 13(4), pages 493-503, March.
    2. Roberta Sardone & Valentina Cardinale & Crescenzo Dell’aquila & Paola Doria & Roberto Solazzo & Alfredo Manuel De Jesus Oliveira Coelho & Etienne Montaigne & Vasco Boatto & Andrea Dal Bianco & Luigi G, 2012. "The liberalisation of planting rights in the EU wine sector," Working Papers hal-01499067, HAL.
    3. Woods, Timothy A. & Deng, Xueting & Nogueira, Lia & Yang, Shang-Ho, 2015. "Local Wine Expenditure Determinants in the Northern Appalachian States," Journal of Food Distribution Research, Food Distribution Research Society, vol. 46(2), July.

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    Keywords

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

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