Explaining World Wine Exports in the First Wave of Globalization, 1848–1938

Abstract

AbstractThe objective of this article is to analyze the determinants of world wine exports in the first globalization, taking into account the principal exporting countries and using an extended version of the gravity model. The article distinguishes between ordinary- and high-quality wines. Our econometric results show that wine exports were not affected by the increase in the size of the markets of consuming countries, since in most of them wine was an alcoholic beverage consumed by a very small minority of the population. The harvests of the producing countries, particularly in preceding years, significantly and positively affected their exports. Conversely, the harvests of importers hurt exports as there was a home bias in consumption due to cultural, price, or tariff protection reasons. In the interwar period, the wine trade was severely affected by a series of shocks such as WWI, the Soviet revolution, the Prohibition, and the 1930s depression. As was the case with trade as a whole, the fall in transaction costs, favored exports, at least those of lower-priced and lower-quality wine. However, the liberalization of trade had a lesser impact on wine than on other products. (JEL Classifications: F14, N50, Q13, Q17)