Karl Storchmann

USING HEDONIC MODELS OF SOLAR RADIATION AND WEATHER TO ASSESS THE ECONOMIC EFFECT OF CLIMATE CHANGE: THE CASE OF MOSEL VALLEY VINEYARDS

In this paper we use two alternative methods to assess the effects of climate change on the quality of wines from the vineyards of the Mosel Valley in Germany. In the first, structural approach we use a physical model of solar radiation to measure the amount of energy collected by a vineyard and then to establish the econometric relation between energy and vineyard quality. Coupling this hedonic function with the physics of heat and energy permits a calculation of the impact of any temperature change on vineyard quality (and prices). In a second approach, we measure the effect of year-to-year changes in the weather on land or crop values in the same region and use the estimated hedonic equation to measure the effect of temperature change on prices. The empirical results of both analyses indicate that the vineyards of the Mosel Valley will increase in value under a scenario of global warming, and perhaps by a considerable amount.

Prices as Quality Signals: Evidence from the Wine Market *

In this paper we empirically analyze whether prices serve as signals. Specifically, and following the hypothesis by Bagwell and Riordan (1991), we examine whether (1) higher quality and (2) low consumer information levels about quality are associated with prices that are above the full information equilibrium. We refer to two price samples of identical wines and analyze the difference between both. The first sample consists of prices for informed wholesalers who can taste the wines before purchase. The second sample comprises retail prices for the imperfectly informed public. We find support for the Bagwell-Riordan model, i.e., price signals respond positively to wine quality and negatively to increasing information. For our sample, the information effect by far dominates the quality effect.

Editor's Choice The Economics of Wine, Weather, and Climate Change

In this article, we provide an overview of the extensive literature on the impact of weather and climate on grapes and wine, with the goal of identifying how climate change is likely to affect their production. We first discuss the physical impact of weather on vine phenology (i.e., the timing of biological events such as bud break or flowering), berry composition, and yields. Then we examine the economic literature that measures the effects of temperature on wine quality, prices, costs, and profits and, based on this review, infer how climate change will affect these variables. We also describe what has been learned thus far about possible adaptation strategies for grape growers that would allow them to mitigate the economic effects of climate change. We conclude that climate change is likely to produce both winners and losers, with the winners being those located closer to the North and South Poles. There are also likely to be some substantial short-run costs as growers adapt to climate change. Nevertheless, wine making has survived through thousands of years of recorded history, a history that has included significant climate changes. ( JEL: Q13, Q18, Q54)

The Economic Impact of the Wine Industry on Hotels and Restaurants: Evidence from Washington State

Washington State enjoys an extraordinarily fast growing wine industry and is now the second largest wine producing state in the U.S. This paper examines the impact of this growth on the revenue of hotels and restaurants. Employing a dynamic quarterly panel model at the county level we show that the regional reputation as high quality wine county, as expressed by critical wine points in the national wine press, has a significant effect on the tourism industry. For Walla Walla, the most prominent wine county in the state, less than 17% of all restaurant and approximately 40% of all hotel revenue is tied to the wine cluster (2007). However, regional reputation is not long-living and needs constant replenishment. (JEL Classification: R11, R15, Q19)