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

  • Seale, James L., Jr.
  • Merchant, Mary

This research estimates price and expenditure elasticities of U.S. red wine imports from five countries--Italy, France, Spain, Australia, and Chile--which are compared to elasticities of domestically produced red wine using the first-difference version of the almost ideal demand system (AIDS). Expenditure elasticity results indicate that if U.S. total expenditures on red wine increase, domestic producers would gain most. Empirical results for conditional own-price elasticities of demand indicate that U.S. and Chilean red wines are elastic while U.S. demand for red wines from other countries are highly inelastic. Due to the magnitude of consumption of U.S. domestic red wines relative to imports, an increase in the price of U.S. wine results in a decline in quantity demanded that is six times larger than that for French and Italian red wines and over 20 times larger than that of other import countries. 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 prices.

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Paper provided by University of Florida, International Agricultural Trade and Policy Center in its series Technical Papers with number 15637.

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Date of creation: 2002
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Handle: RePEc:ags:uflotp:15637
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  1. Seale, James L., Jr. & Sparks, Amy L. & Buxton, Boyd M., 1992. "A Rotterdam Application To International Trade In Fresh Apples: A Differential Approach," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 17(01), July.
  2. Chalfant, James A, 1987. "A Globally Flexible, Almost Ideal Demand System," Journal of Business & Economic Statistics, American Statistical Association, vol. 5(2), pages 233-42, April.
  3. Seale, James Jr. & Walker, Wayne E. & Kim, In-Moo, 1991. "The demand for energy : Cross-country evidence using the Florida model," Energy Economics, Elsevier, vol. 13(1), pages 33-40, January.
  4. Terry L. Kastens & Gary W. Brester, 1996. "Model Selection and Forecasting Ability of Theory-Constrained Food Demand Systems," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 78(2), pages 301-312.
  5. Moschini, GianCarlo, 1995. "Units of Measurement and the 'Stone Index' In Demand System Estimation," Staff General Research Papers 5058, Iowa State University, Department of Economics.
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