Trade Uncorked: Genetic Resistanceand Quality Heterogeneity in Wine Exports

A nascent literature explores the impact of taste differences on trade. In gravity model estimations, the coefficient on geographical distance is large because it tends to capture such (usually unobservable) preference-related frictions. A related stream of research also shows that the effect of distance decreases with quality. We bring both aspects together by asking how heterogeneity in tastes affect exports and how this effect may depend on good quality. We examine these questions in the context of French wine, i.e. a cultural good characterized by a great variety of types (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 very complete data on French wine exports by detailed appellation between 1998 and 2015. We use genetic distance as a proxy for taste differences explained mainly by biology and culture, while controlling for the other pathways through which culture affects trade (for instance the role of trust) and for other factors associated with genetic distance (e.g. micro-geography). We show that the ‘taste’ component of genetic distance has an independent effect on trade, explaining between 20% and 40% of the coefficient of physical distance. Heterogeneous effects of physical and genetic distances are estimated using alternative proxies of quality (namely the reputation of wine regions and experts’ scores). We confirm that high-end wines tend to escape gravity but also the home bias due to tastes – possibly illustrating the fact that luxury goods have become global iconic products, less associated to national original preferences but rather to status and investment motives.(This abstract was borrowed from another version of this item.)