Analysis of Italian High Quality Wine Exports using the Gravity Model Approach

Abstract

Italian wine firms are facing a significant reduction in wine consumption and increasing competition in international markets. In fact, markets are becoming increasingly liberalized and producers of non-EU countries adopt even more aggressive strategies to increase their competitiveness. Nevertheless, demand for high quality wine which includes a large number of Italian wines, is increasing. The aim of this work is to explain the magnitude of the trade flows for high quality wine from Italy to its main importing countries. This objective has been reached by establishing an appropriate econometric model derived from an extended form of the Gravity Model. This model has been broadly applied to the analysis of international trade because it provides robust estimates. Note that applications to the specific products' trade are still limited in number. The results obtained and the model itself are useful in forecasting potential trends in the exportation of high quality Italian wines. Moreover, it is possible to identify the growing markets where Italian ventures could exploit certain promotional and communication strategies. Finally, with respect to Italian high quality wine these estimates give a quantitative evaluation of the export gains that could result from the enlargement of the EU and from an increasing liberalization in international trade.