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

Abstract

AbstractThis 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].