Horizontal Differentiation and Determinants of Wine Exports: Evidence from Portugal

Abstract

Assuming horizontal differentiation and using an expanded gravity model, the main objective of this article is to assess the determinants of Portuguese wine exports. Horizontal differentiation is considered, with still and fortified wines being distinguished, as well as three distinct designations of origin: Vinho Verde, Douro, and Port wines. The results from the period between 2006 and 2016 suggest that wineries and private and public agencies should focus their commercial and policy efforts on countries with high purchasing power and/or with great potential for growth, regardless of whether the customs costs are higher. Moreover, it is concluded that horizontal differentiation influences the export determinants, suggesting there should exist different internationalization strategies for distinct types of wine. (JEL Classifications: F10, F14, L66)

Macroeconomic determinants of Port and Douro wine exports: An econometric approach

“…Regarding ad valorem equivalent tariffs, they do not have a statistically significant effect. This result was also highlighted by Gouveia et al (2018) and Macedo et al (2020), suggesting that the differentiating characteristics of these two wines more than compensate for customs duties. However, another explanation may lie in the fact that changes in tariffs have been scarce in recent years and fixed effects capture their impact.…”

“…The literature analysing world wine trade with the gravity model (Castillo et al 2016, Dal Bianco et al 2016, Dascal et al 2002, Gouveia et al 2018, Macedo et al 2019, 2020 is the base for the following export function of Port and Douro wines:…”

“…The alternative solution to proxy multilateral resistance terms is to consider countries fixed effects (Dal Bianco et al 2016, Dal Bianco et al 2017, Macedo et al 2020, Santeramo et al 2019, not requiring strong structural assumptions on the underlying model (Head, Mayer 2014). However, its main drawback is not allowing estimation of the coefficients for time-invariant variables (such as distance, landlockedness, and common language).…”

“…Concerning the results associated with wine production in the importing country, the estimated coefficients are almost all nonsignificant, with the exception of the barely statistically significant coefficient in column (III). For Port wine, following Macedo et al (2020), this effect may be explained by the phenomenon that the top wine-producing countries do not find a valid substitute for Port wine in their domestic markets. This is also a possible explanation for Douro wine, but it is more likely that Douro wine arouses greater interest in more mature wine markets.…”

Guest Editor's Introduction to the Special Issue: Wine, Macroeconomics, and Finance

“…Similarly, Anthony Macedo, Sofia Gouveia, and João Rebelo examine "Horizontal Differentiation and Determinants of Wine Exports: Evidence from Portugal" (Macedo, Gouveia, and Rebelo, 2020). The authors draw on data of Portuguese wine export to 89 countries for the time from 2006 to 2016.…”