| International trade of wine has grown in terms of both volume and value during the last two decades. Countries which are the largest producers, consumers, and exporters of wine have faced a declining domestic demand since the 1970s. Inventory accumulations and/or unharvested areas of grapes have occurred in Western Europe and North America, the larger production areas. Therefore these producers have expanded their marketing efforts, focusing on the international market.;The objective was to develop an econometric model of the international demand for wine. Demand relationships for domestic and import wine were specified and estimated for the major countries involved in the international wine market. Eleven countries were modeled using 1963 to 1986 time series data: Australia, Belgium, Canada, France, Italy, Japan, Portugal, Spain, United Kingdom, United States, and West Germany.;The econometric model was a simultaneous system of sixty-two per capita wine demand equations representing domestically produced wine and imported wine from among each of the other ten nations. Wine was treated as a homogeneous product, and nonalcoholic beverages, malt beverages, and distilled spirits were considered substitute beverages.;In the domestic demand equations, own-price elasticities were mainly in the inelastic region. This suggests that the consumption of domestically produced wine is not sensitive to price changes. Most cross elasticities in the domestic demand equations suggested a weak substitution relationship between other beverages and domestic wine.;The implications, in terms of competition among wines from various sources, can be evaluated via the elasticities. High cross elasticities suggest a greater degree of consumer sensitivity to prices of competitive wines. The import wine demand's cross price elasticity with domestically produced wine indicates a degree of competitiveness exists for most countries. Positive income elasticities were found for Canada, Italy, Japan, Portugal, and the United States; negative income elasticities were found for the United Kingdom, Spain, and Australia. France and Belgium had import demand equations with positive elasticities and other equations with negative income elasticities. |
