In search of agri‐food quality for wine: Is it enough to join a geographical indication?

Abstract

This study examines whether geographical indications (GIs) truly enhance producer quality, which is a main regulatory justification for the GIs' existence. We compare the quality of wine producers with and without GIs and test for the effectiveness of GIs based on (a) the strictness of GIs' production standards and (b) GIs' organizational characteristics as a collective brand. We argue that GIs encourage producer quality because they attenuate free-riding problems, provide incentives to invest and facilitate knowledge sharing. Focusing on the Spanish wine industry, the results reveal that except for wineries with the lowest GI category (i.e., protected geographical indication), GI wineries show higher quality than non-GI wineries. We also observe that more stringent categories increase quality but at a decreasing rate. Regarding the influence of organizational features, we found that collective action problems seem to be relevant. First, above a certain threshold, the number of producers affiliated with a GI decreases the wine producer's average quality (i.e., it shows an inverted U-shaped relationship with quality). Second, GIs covering very large geographic areas are found to be less effective. [EconLit Citations: L15, Q12, Q18]. 1 | INTRODUCTION Geographical indications (GIs) constitute a central tool of European Union (EU) quality policies for the agri-food sector (Agostino & Trivieri, 2014; Josling, 2006). This aim is clearly and explicitly referred to by Article 1 of the European regulation on GIs: "The measures set out in this Regulation are intended to support agricultural and processing activities and the farming systems associated with high-quality products, thereby contributing to the achievement of rural development policy objectives" (Regulation UE1151/2012, emphasis added). Surprisingly, the economic and business literature has not studied whether GIs achieve their main objective, that is, to promote the production of high-quality products among firms. In other words, does belonging to a GI enhance the quality of the producers? This is not a trivial issue because guaranteeing the origin of a product does not necessarily guarantee the high quality (Josling, 2006). Nevertheless, this question has not often been the focus of research on GIs. Conversely, the economic debate about GIs has gone towards the appraisal of their collateral effects, focusing on their potential restrictive effects on international trade (e.g., Frantz, 2016; Meloni & Swinnen, 2018) as nontariff barriers that serve the protectionist interests of domestic agri-food industries (e.g., Landi &

The benefits and barriers of geographical indications to producers: A review

“…Given this possibility, producers have incentives to improve their production. Therefore, GI products tend to have higher quality than products from individual signs (López-Bayón et al ., 2020). Participating in a GI is seen as a way to increase quality and add value to production, thus creating a competitive advantage by offering a product that has unique characteristics that come from its place of origin (Dentoni et al ., 2012; Lamarque and Lambin, 2015; Mcmorran et al ., 2015; Egelyng et al ., 2017; Rahmah, 2017).…”

“…The incentive to increase the quality of production after getting the GI is shown in several articles (Quiñones-Ruiz et al ., 2016; Hoang et al ., 2020; Ingram et al ., 2020; López-Bayón et al ., 2020). GI also helps to improve products' image and marketing communication (Bryła, 2018; Chalupová et al ., 2021).…”

“…Given this possibility, producers have incentives to improve their production. Therefore, GI products tend to have higher quality than products from individual signs (López-Bayón et al, 2020). Participating in a GI is seen as a way to increase quality and add value to 1…”

What Is the Environmental Impact of Wine Entering Global Value Chains? Studying the Evolution of CO2 Emissions from the Export of Spanish Denomination of Origin Wines

“…They are also defined by different historic, economic and social circumstances, which have formed the respective winemaking sectors in each case. This combination of factors finally gives rise to the transferability of concepts such as quality and exclusivity transmitted in the end product [ 95 , 96 , 97 ].…”

The impact of geographical indications on farm incomes in the EU olives and wine sector

“…This leads to product differentiation and potentially to price premiums paid by consumers (see e.g. Lopez-Bayon et al (2020) for studies on consumer willingness-to-pay for geographical indications). Monier-Dilhan et al (2020) find positive price premiums in 27 case studies of GI in the EU.…”