Abstract
The objective of this paper is twofold: firstly, it analyzes the evolution of frauds in the Italian wine value chain over the period 2007–2015, and then, using a properly disaggregated social accounting matrix (SAM) of the Italian economy, it simulates the impact of wine frauds on the national economy in terms of growth, employment, value added and income. The wine industry is the sector most exposed to frauds within the Italian agro-food system accounting for 88% of total value of seized agro-food outputs. Most irregularities (95%) are made by only three agents, specifically individual wineries, bottlers-wholesalers and retailers. We estimated industry-specific SAM multipliers to assess the share of the Italian economy depending on irregular wine production. These activities account for 11.5% of specialized permanent crop farms output and over 25% of wine industry output. This is a sign of vulnerability of the wine industry: should a food scandal/scare determine a drop in consumers’ demand, the negative effect on production activities of these sectors may be large. The SAM was also used to perform an impact analysis adopting a counterfactual approach. Results show a slightly positive increase of value added (6 million euro) along with an overall decrease in the activity level (an output loss of 406 million euro and more than six thousand full time jobs lost). This contractionary effect can be explained with fraud rents. Indeed, the extra-profits from frauds do not activate the economy circular flow as most of them leak out to exogenous accounts such as the public administration and the rest of the world.
Highlights
The Italian agri-food system is one of the most important components of the “Made in Italy”
Wine was supplied by production activities of different size and nature that could be classified into different industries within the social accounting matrix (SAM)
The total value of output is shared between production activities classified under agriculture (47%)—mostly small-medium specialized permanent crop farms carrying out the whole production process from the vineyard to the marketing of bottled wine (43%) and other farms (4%)—and the wine industry (50%)
Summary
The Italian agri-food system is one of the most important components of the “Made in Italy”. In 2018, the agricultural sector produced outputs valued 55.9 billion euro, employing 1.2 million labor units and exporting some 6.8 billion euro of agricultural goods (ISTAT 2019a, b; ISMEA 2019a), while the food industry turnover peaked at 140 billion euro, with 385 thousand employees and export exceeding 35.1 billion euro, which ranks food as the second Italian largest exporting sector in 2018 (ISMEA 2019a; Federalimentare 2019a). In Italy the wine sector is the third most important agri-food sector after dairy and meat in terms of production with an industrial turnover exceeding 13.2 billion euro and more than 13 thousand employees in the wine industry, but it is the most important agri-food exporting sector accounting for 6.2 billion euro in 2018, i.e. 14.8% of total agri-food export, mostly represented by high-quality wines with geographical indication (ISMEA 2019b).. Wine ranks first by far among agri-food value chains in terms of number of detected irregularities and value of seized products (ICQRF 2019). There is a fundamental gap in the economic literature in so far no comprehensive analysis of frauds in the wine sector in Italy has been carried out so far and no quantitative assessment of the economic impact of wine frauds on the Italian economy
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