Journal of Wine Economics
Volume 8 | 2013 | No. 1
Is Georgia the Next “New” Wine-Exporting Country? (FULL TEXT PDF)
Kym Anderson
ABSTRACT | Pages 1-28The former Soviet republic of Georgia is reputedly the cradle of wine and has enjoyed at least 8,000 vintages. It has also been a major supplier of wine to Russia for at least 200 years, but to few other countries. In 2006, however, Russia imposed a ban on beverage imports from Georgia. Since then this relatively poor country, in which nearly half the population is rural and most farmers have a vineyard, has been seeking to develop new export markets for its wine. This paper assesses the potential for growth in Georgia’s wine production and exports. It then outlines ways to addresses the challenges involved in trying to realize that potential, drawing on the experience of other countries that have rapidly expanded their wine exports in the past two decades. Implications for policy are drawn, particularly for ensuring that poverty is reduced as exports expand and the economy grows. (JEL Classifications: F14, F15, F54, Q17)
The Price Premium for Organic Wines:
Estimating a Hedonic Farm-Gate Price Equation
Alessandro Corsi and Steinar Strøm
ABSTRACT | Pages 29-48Organic wines are increasingly produced and appreciated. Because organic production is more costly, a crucial question is whether they benefit from a price premium. We estimate hedonic price functions for Piedmont organic and conventional wines. We use data on the production side in addition to variables of interest to consumers. Our results show that, along with characteristics of interest to consumers, some farm and producer characteristics not directly relevant for consumers do significantly affect wine prices. We find that organic wine tends to obtain higher prices than conventional wine. The price premium is not simply an addition to other price components; organic quality modifies the impact of the other variables on price. (JEL Classification: C21, D49, L11, Q12)
Do Fine Wines Blend with Crude Oil? Seizing the Transmission of Mean and Volatility Between Two Commodity Prices
Elie I. Bouri
ABSTRACT | Pages 49-68This study applies a multivariate model to examine the dynamics of mean and volatility transmission between fine wine and crude oil prices using daily observations from January 2004 to December 2011. The results suggest that the crude oil mean determines the wine market. In each series, volatility persistence is high and significant; innovations in each market seem to include figures that are valuable to risk managers seeking to predict volatility in other markets. During the financial crisis of 2008, wine and oil conditional volatilities climbed but then returned to their overall pre-crisis levels. (JEL Classifications: G11, G15, Q14, Q40)
Valuing Vineyards: A Directional Distance Function Approach
Robin Cross, Rolf Färe, Shawna Grosskopf and William L. Weber
ABSTRACT | Pages 69-82We exploit the duality between the cost function and the directional distance function in value space to recover hedonic prices of product or asset characteristics. An application is offered for 96 Oregon vineyards located in the Willamette Valley of Oregon that sold between 1995 and 2007. Specifically, we recover hedonic prices for the number of high-, medium-, and low-quality vineyard acres and the number of nonvineyard acres sold in the parcel. Not surprisingly, higher-quality vineyard acres have a higher estimated hedonic price than medium- or low-quality acres, but as the number of high-quality acres increases, the hedonic price falls. (JEL Classification: D24, C61, Q10)
What Is Making Vineyard Investment in Northwest Victoria, Australia, Slow to Adjust?
Emayenesh Seyoum-Tegegn and Chris Chan
ABSTRACT | Pages 83-102This paper reports a use of the real-options valuation methodology to analyze wine grape vineyard investment under price and yield uncertainty. Threshold annual rates of revenue per hectare to trigger entry and exit, respectively, were calculated for three different sizes of wine grape vineyards in northwest Victoria, Australia. The modeling identified lower exit and higher entry triggers than would be indicated by a conventional approach that ignores the uncertainty underpinning adaptive investment decisions. Between these triggers is a relatively wide gap of estimated indeterminacy in vineyard investment that highlights the intertwined influence of numerous economic factors—cost structure, economies of scale, market volatility, transaction costs, and sunk and salvaged asset valuation. Drawing on these determinants of vineyard investment and disinvestment, the paper discusses the role of investment incentives in affecting industry transformation and the scope for policy intervention to assist structural adjustment of the wine grape sector. (JEL Classification: C61, G11, I25, Q12)
Book & Film Reviews
Book Review
BENJAMIN LEWIN
In Search of Pinot Noir
Reviewer: John Winthrop Haeger
Page 104-106
Book Review
JANCIS ROBINSON, JULIA HARDING & JOSÉ VOUILLAMOZ
Wine Grapes: A Complete Guide to 1,368 Vine Varieties, including their Origins and Flavours
Reviewer: Kym Anderson
Page 106-109
Book Review
ROBIN VON HOLDT
Top 100 South African Wines and Wine Lists, 2012/2013
Reviewer: Nick Vink
Page 109-110
Book Review
ELMARIE SWART & IZAK SMIT
The Essential Guide to South African Wines: Terroir and Travel
Reviewer: Nick Vink
Page 110-111
Book Review
PHILIP VAN ZYL
Platter’s South African Wine Guide 2013
Reviewer: Nick Vink
Page 111-112
Book Review
JOHAN F.M. SWINNEN
The Economics of Beer
Reviewer: John Kwoka
Page 113-116
Film Review
SKY PINNICK (DIRECTOR & PRODUCER)
Boom Varietal: The Rise of Argentine Malbec
Reviewed by David J. Hoaas
Pages 114-120
Book Review
CLIFFORD P. OHMART
View From the Vineyard: A Practical Guide to Sustainable Winegrape Growing
Reviewer: Lawrence R. Coia
Page 121-124
Book Review
SIMONE CINOTTO
Soft Soil, Black Grapes: The Birth of Italian Winemaking in California
Reviewer: Zachary Nowak
Page 124-128
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