Search

A nascent literature explores the impact of taste differences on trade. In gravity model estimations, the coefficient on geographic distance is large because it tends to capture such (usually unobservable) preference‐related frictions. We examine this question in the context of French wine, that is, a cultural good characterized by a great variety of types (i.e. accommodating a large heterogeneity in wine tastes) and of quality levels (from cheap table wine to the finest grands crus). A series of gravity models are estimated using the universe of French bottled wine exports by detailed appellation between 1998 and 2015. We use genetic distance as a proxy for taste differences inherited from biology and culture. We show that this interpretation is not ruled out by other possible roles of genetic distance on trade (i.e., microgeography or non‐gustatory cultural dimensions such as trust). We find that genetic distance has an independent effect on trade, explaining between 20% and 40% of the coefficient on geographic distance. Dynamic estimates confirm this result and establish both the persistent and contemporaneous effects of genetic differences. A heterogeneous analysis also corroborates previous findings in the literature showing that high‐tier goods tend to escape gravity. In addition, we find that premium wines escape the home bias associated with taste differences, possibly illustrating that luxury wines have become global iconic products purchased for status and investment motives rather than for gustatory pleasure. [ABSTRACT FROM AUTHOR]

In the latest wave of globalization, the share of global wine production crossing national borders has trebled since the mid‐1980s, to more than 40%. Prior to then, wine was confined mostly to southern Europe with very little trade outside Europe. Why was wine globalization so belated? Why did it take so long for wine exports to take off even in the New World regions of European settlement? This article addresses these questions and also seeks to explain the bilateral patterns of wine trade. It concludes by speculating briefly on how wine markets might develop in the foreseeable future. [ABSTRACT FROM AUTHOR]

Abstract: Dramatic changes in the 1860–1970 wine trade provide insights on the political economy of regulations and policy instrument choice and trade. An invasion of Phylloxera in the 1870s turned France from the world's leading exporter to a massive importer of wine and grapes. When French production recovered a combination of tariffs, safety regulations and quality standards were introduced to protect its French producers, causing dramatic changes in global wine and grape production and trade, including in Spain, Italy, Turkey, Greece, Algeria, Tunisia and Morocco. Changes in wine regulations were caused by relative income and loss aversion factors in political economy. Tariffs were the preferred policy instruments as they directly restrict imports, bring in revenues, have low transaction costs and are preferred political instruments when there are information imperfections. Safety regulations and quality standards, including labelling and input prohibitions, reduce asymmetric information for consumers or undesirable externalities, and simultaneously protected domestic producers. Regulations were often targeted at imported products (wine and raisins) when tariffs were ineffective or constrained by institutions (such as on colonial wine). Hence, tariffs and quality regulations were jointly used in wine policy, both as complements and as substitutes in policy design. [ABSTRACT FROM AUTHOR]