The Role of Culture, Language and Trade Agreements in Global Wine Trade

Jeremiás Máté BaloghAttila Jámbor

DOI 10.7160/aol.2018.100302
No 3/2018, September
pp. 17-29

Balogh, J. M. and Jámbor, A. (2018) “The Role of Culture, Language and Trade Agreements in Global Wine Trade", AGRIS on-line Papers in Economics and Informatics, Vol. 10, No. 3, pp. 17-29. ISSN 1804-1930. DOI 10.7160/aol.2018.100302.

Abstract

In the progressively globalising world, wine trade is changing shape. In recent decades, major wine producers have suffered a remarkable drop in their domestic wine consumption, while New World wine producers have increased their production potential and induced new demand in foreign markets. These changes have been accompanied by a geographical relocation of wine consumption and trade. The aim of our paper is to analyse the effect of cultural-geographical proximity, free trade and the role of linguistic similarity on bilateral wine trade in the world major wine producer countries, employing balanced panel gravity model. Regression results suggest that larger countries export more wine, while transport costs increase in line with geographical distance, especially for landlocked trading partners. Moreover, global wine export costs are lower if trading partners are culturally similar; have the same religion or both are members of the WTO or have regional trade agreements.

Keywords

Wine trade, cultural proximity, language clusters, gravity model.

References

  1. Aizenman, J. and Brooks, E. (2008) “Globalization and taste convergence: the cases of wine and beer”, Review of International Economics, Vol. 16, No. 2, pp. 217-233. ISSN 1467-9396. DOI 10.1111/j.1467-9396.2007.00659.x.
  2. Anderson, J. E. and van Wincoop, E. (2003) “Gravity with gravitas: a solution to the border puzzle”, American Economic Review, Vol. 93, pp. 170-92. ISSN 0002-8282. DOI 10.1257/000282803321455214.
  3. Anderson, J. E. (1979) “A theoretical foundation for the gravity equation”, American Economic Review, Vol. 69, pp. 106-116. ISSN 0002-8282.
  4. Bacchetta, M., Beverelli, C., Cadot, O., Fugazza, M., Grether, J-M., Helble, M., Nicita, A. and Piermartini R. (2012) “A practical guide to trade policy analysis”, World Trade Organisation and United Nation, June 2012, Switzerland, 106 p. [Online] Available: https://www.wto.org/english/ res_e/publications_e/wto_unctad12_e.pdf [Accessed: 26 Oct. 2014].
  5. Baier, S. L. and Bergstrand, J. H. (2009) “Bonus vetus OLS: a simple method for approximating international trade-cost effects using the gravity equation”, Journal of International Economics, Vol. 77, No. 1, pp. 77–85. ISSN 0022-1996. DOI 10.1016/j.jinteco.2008.10.004.
  6. Bergstrand, J. H. (1985) “The gravity equation in international trade: some microeconomic foundations and empirical evidence”, The Review of Economics and Statistics, Vol. 67, No. 3, pp. 474-81. E-ISSN 15309142, ISSN 00346535. DOI 10.2307/1925976.
  7. Bergstrand, J. H. (1989) “The generalized gravity equation, monopolistic competition and the factor- proportions theory in international trade”, The Review of Economics and Statistics, Vol. 71, No. 1, pp. 143-53. E-ISSN 15309142, ISSN 00346535. DOI 10.2307/1928061.
  8. Cembalo, L., Caracciolo, F. and Pomarici, E. (2014) “Drinking cheaply: the demand for basic wine in Italy”, Australian Journal of Agricultural and Resource Economics, Vol. 58, No. 3, pp. 374-391. ISSN 1467-8489. DOI 10.1111/1467-8489.12059.
  9. CEPII (2013) “GeoDist and Language database”, Centre de recherche français dans le domaine de l'économie internationale. [Online]. Available: http://www.cepii.fr [Accessed: 10 Sep. 2014].
  10. Chaney, T. (2008) “Distorted gravity: the intensive and extensive margins of international trade”, American Economic Review, Vol. 98, pp. 1707-1721. ISSN 0002-8282. DOI 10.1257/aer.98.4.1707.
  11. Dal Bianco, A., Boatto, V. L., Caracciolo, F. and Santeramo, F. G. (2015) “Tariffs and non-tariff frictions in the world wine trade”, European Review of Agricultural Economics, Vol. 49, No. 1, pp. 31-57. E-ISSN 1464-3618, ISSN 0165-1587. DOI 10.1093/erae/jbv008.
  12. Dal Bianco, A., Boatto, V., Estrella-Orregob, J. and Gennari, A. (2013) “Is gravity pushing Argentinean wine exports? A gravity model applied to Argentinean wine”, VDQS XX Enometrics Conference, Talca - Chile, September 2013. [Online]. Available: http://www.wineecoreports. com/Working_Papers/Abstract/WP_2013/DAL-BIANCO_ESTRELLA-ORREGO_BOATTO_ GENNARI.pdf [Accessed: 5 May 2015].
  13. Dascal, D., Mattas, K. and Tzouvelekas, V. (2002) “An Analysis of EU Wine Trade: A Gravity Model Approach International”, Advances in Economic Research, Vol. 8, No. 2, pp. 135-147. E-ISSN 1573-966X, ISSN 1083-0898. DOI 10.1007/bf02295344.
  14. De Blasi, G., Seccia, A., Carlucci, D. and Santeramo, F. (2007) “Analysis of Italian High Quality Wine Exports using the Gravity Model Approach”, Contributed Paper prepared for presentation at the 105th EAAE Seminar Bologna, Italy, March 8-10, 2007. [Online]. Available: http://ageconsearch.umn.edu/bitstream/7901/1/cp070026.pdf [Accessed: 22 Jan. 2016].
  15. De Sousa, J. (2014) "International Economics Data and Programs Regional Trade Agreements". [Online]. Available: http://jdesousa.univ.free.fr/data.htm#RegionalTradeAgreements [Accessed: 10 Jan. 2016].
  16. Eaton, J. and Kortum, S. (2002) “Technology, Geography, and Trade”, Econometrica, Vol. 70, No. 5, pp. 1741-1779. E-ISSN 1468-0262. DOI 10.1111/1468-0262.00352.
  17. Filippaios, F. and Rama, R. (2011) “Cultural Distance and Internationalization: The World’s Largest Food and Drink Multinationals”, Agribusiness, Vol. 27, No. 4, pp. 399-419. ISSN 0742-4477. DOI 10.1002/agr.20283.
  18. Head, K. and Mayer, T. (2013) “Gravity Equations: Workhorse, Toolkit, and Cookbook”, CEPII Working Paper (Centre d’études prospectives et d’informations internationales), No. 2013-27. DOI 10.1016/b978-0-444-54314-1.00003-3.
  19. Heckman, J. (1979) “Sample selection bias as a specification error”, Econometrica, Vol. 47, No. 1, pp.153-161. E-ISSN 1468-0262. DOI 10.2307/1912352.
  20. Helpman, E., Melitz, M. and Rubinstein, Y. (2008) “Estimating Trade Flows: Trading Partners and Trading Volumes”, Quarterly Journal of Economics, Vol. 123, No. 2, pp. 441-487. E-ISSN 1531-4650, ISSN 0033-5533. DOI 10.1162/qjec.2008.123.2.441.
  21. Kang, H. and Fratianni M. (2006) “International Trade, OECD Membership, and Religion”, Open Economies Review, Vol. 17, No. 4, pp. 493-508. E-ISSN 1573-708X, ISSN 0923-7992. DOI 10.1007/s11079-006-0361-y.
  22. Labys, W. C. and Cohen, B. C. (2004) “Trends or Cycles in Global Wine Export Shares”, Division of Resource Management Working Paper RESMWP-04-03, Oenometrics XI conference VDQS-AEA, Dijion France, May 20-22. [Online]. Available: http://www.ibrarian.net/navon/paper/TRENDS_ OR_CYCLES_IN_GLOBAL_WINE_EXPORT_SHARES.pdf?paperid=8089296 [Accessed: 10 Oct. 2015].
  23. La Porta, R., Lopez-de-Silanes, F., Shleifer A. and Vishny R. (1999) “The Quality of Government", Journal of Law, Economics and Organization”, Vol. 15, p. 222-279. E-ISSN 1465-7341, ISSN 8756-6222. DOI 10.3386/w6727.
  24. Linders, G. M. and de Groot, H. L. (2006) “Estimation of the gravity equation in the presence of zero flows”, Tinbergen Institute, Discussion Paper 2006-072/3. DOI 10.2139/ssrn.924160.
  25. Lombardi, P., Dal Bianco A., Freda, R., Caracciolo, F. and Cembalo, L. (2016) “Development and trade competitiveness of the European wine sector: a gravity analysis of intra-EU flows”, Wine Economics and Policy, Vol. 5, No. 1, pp. 50-59. ISSN 2212-9774. DOI 10.1016/j.wep.2015.12.002.
  26. Stanley, M. (2013) “The Global Wine Industry”. October 22, 2013. [Online]. Available http://blogs. reuters.com/counterparties/files/2013/10/Global-Wine-Shortage.pdf [Accessed: 22 Dec., 2015]
  27. Morrison, A. and Rabellotti, R. (2014) “Gradual catch up and enduring leadership in the global wine industry”, American Association of Wine Economists, Working paper No. 148. [Online]. Available: http://www.wine-economics.org/dt_catalog/aawe-working-paper-no-148-business/
  28. Pinilla, V. and Serrano, R. (2008) “The Agricultural and Food Trade in the First Globalization: Spanish Table Wine Exports 1871 to 1935-A Case Study”, Journal of Wine Economics, Vol. 3, No. 2, pp. 132-148. E-ISSN 1931-437X, ISSN 1931-4361. DOI 10.1017/s1931436100001176.
  29. Ronen, S. and Shenkar, O. (1985) “Clustering Countries on Attitudinal Dimensions: A Review and Synthesis”, Academy of Management Review, Vol.10, No. 3, pp. 435-454. E-ISSN 1930-3807, ISSN 0363-7425. DOI 10.2307/258126.
  30. Santos, S. J. and Tenreyro, S. (2006) “The log of gravity”, The Review of Economics and Statistics Vol. 88, pp. 641–58. E-ISSN 15309142, ISSN 00346535. DOI 10.1162/rest.88.4.641.
  31. Tinbergen, J. (1962) “An Analysis of World Trade Flows" in "Shaping the World Economy", Twentieth Century Fund, New York.
  32. Triandis, H. C. (1994) “Culture and Social Behavior”, Mass McGraw Hill Custom Publishing, Boston, ISBN 0073052604.
  33. World Bank (2014a) “World Integrated Trade Solution” (WITS), Commodity Trade Database. [Online]. Available: http://wits.worldbank.org [Accessed: 15 May 2014].
  34. World Bank (2014b) “World Development Indicators” (WDI) database. [Online]. Available: http://data.worldbank.org/data-catalog/world-development-indicators [Accessed: 10 May 2014].
  35. WTO (2013) “World Trade Organisation Members and observers”, [Online]. Available http://www.wto.org, [Accessed: 20 Sep. 2014].

Full paper

  Full paper (.pdf, 331.18 KB).