Trade uncorked: Genetic distance and taste-related barriers in wine trade

Abstract

A nascent literature explores the impact of taste differences on trade. In gravity model estimations, the coefficient on geographic distance is large because it tends to capture such (usually unobservable) preference-related frictions. We examine this question in the context of French wine, that is, a cultural good characterized by a great variety of types (i.e. 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 the universe of French bottled wine exports by detailed appellation between 1998 and 2015. We use genetic distance as a proxy for taste differences inherited from biology and culture. We show that this interpretation is not ruled out by other possible roles of genetic distance on trade (i.e., microgeography or non-gustatory cultural dimensions such as trust). We find that genetic distance has an independent effect on trade, explaining between 20% and 40% of the coefficient on geographic distance. Dynamic estimates confirm this result and establish both the persistent and contemporaneous effects of genetic differences. A heterogeneous analysis also corroborates previous findings in the literature showing that high-tier goods tend to escape gravity. In addition, we find that premium wines escape the home bias associated with taste differences, possibly illustrating that luxury wines have become global iconic products purchased for status and investment motives rather than for gustatory pleasure.