Geographical Indications and Welfare: Evidence from the US Wine Market

Raj Chandra, GianCarlo Moschini, Gabriel E. Lade
August 2023  [21-WP 628] (Revised)

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Chandra, R., G. Moschini, and G.E. Lade. 2023. "Geographical Indications and Welfare: Evidence from the US Wine Market." Working paper 21-WP 628. Center for Agricultural and Rural Development, Iowa State University.


A systematic component of wine quality is believed to depend on the geo-climatic factors of its production conditions. This belief has long been a motivation for the development of geographical indications for wines. In the United States, American Viticulture Areas (AVAs) represent the most common geographic identifier firms use to differentiate their products. We estimate a discrete-choice model of US wine demand to study consumers’ valuation of the geographic origin of wine, and the market and welfare impacts of AVAs and other US appellations for wine. Specifically, we develop a two-level nested-logit choice model featuring many wine products and characteristics—including wine type, brands, and varietals, in addition to geographic origin—and estimate it using Nielsen Consumer Panel data over the 2007–2019 period. We find significant welfare gains from information about the geographic origin of wines. Over the period of interest, the welfare gain attributable to US geographic origin designation is estimated at about $5.13 billion, with wine producers and retailers capturing approximately 77% of this surplus. Virtually all of consumer welfare gains are due to product differentiation and increased product variety enabled by information about the wine origin.