Tuesday, June 24, 2008

More trade, more wine! 

My friend Omer Gokcekus is a very curious economist (and I mean that insofar as he plays in more areas of economics than I do, and that he joined me in an Indian restaurant in Yerevan, Armenia one night -- now that's curious!). He also writes interesting articles, but I don't think he sent me this one before:
Our findings show that globalization has benefited the American wine drinker. We find that there is an overall decrease in the real price of a shopping cart of all 100 wines from year to year. For instance, the real price (in 1988 prices) for the basket of the entire Top 100 list was $4,313 in 1988; $3,132 in 1993; $2,533 in 1999; and $2,421 in 2004. That is nearly a 44% decrease in prices from 1988 to 2004. At the same time, there was no significant change in the quality of the wines on the Top 100 list...

Our econometric analyses show that the decreasing wine price over the past 17 years can be explained by the loss of shares of the Old World countries: Replacing a French wine with a U.S. wine lowers the average real price by 1.0%; an Australian wine by 1.1%; and a wine from non-incumbent countries by 1.5%. To put it differently, replacing an Old World wine (French, Italian, etc.) with a New World wine (US, Australia etc.) lowers the average real price by 1%. Replacing an Old World wine with a New-New World wine (Chile, South Africa etc.) lowers the average real price by 2.5%. The increased presence of newcomers puts significant downward pressure on prices.
h/t: Marginal Revolution. His paper on corruption due in my book this fall will be a highlight.

UPDATE: #1 is a local cook at a number of places, most recently he's been cooking at a local bistro that wants to sell good wine and food. I was invited to stop for coffee yesterday and walked in instead on a wine salesman pouring some samples of his latest ideas. Wines from Spain and Australia -- one of the latter an incredible shiraz -- and only one Old World of the nine we sampled. (Nine, by the way, is too many, but that's another post.) How little time has passed since these wines were almost impossible to get.

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