AAWE, Economics Dept, New York University, 19 W 4th St, 6Fl., New York NY 10012aawe@wine-economics.org

AAWE Working Paper No. 157 – Economics


Income and Competition Effects on the World Market for French Wines

Fabien Candau & Florent Deisting


The price of wine grew at a fast rate between 2001 and 2010 and has since been stagnating. The period of growth may be explained by the rise in the demand from emerging markets and from the richest people (the top 1% and 10%), while the stagnation may come from the entry of new varieties causing a crowding/competition effect on the market. We estimate the generalized model of ideal variety proposed by Hummels and Lugovskyy (2009) that combines these two elements  and find support for this explanation. A 1% increase in GDP per-capita (income effect) generated an increase in price of 1.13% between 2001 and 2011. In contrast, a 1% increase in market size (competition eject) reduced price by 1.10% over the same period. This paper also analyses these effects by considering exports of wine according to mode of transport and indirectly evaluates economies of scale in transport of wine exported by plane, boat and road.

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