Investigation of export-driving forces and trade potentials of the U.S. bourbon whisky industry

Abstract

ABSTRACT Bourbon whisky is one of the world’s most popular spirits and is a vital component of U.S. spirits exports. Yet, very limited research has examined the trade patterns of U.S. bourbon whisky. The purposes of this paper lie in (i) filling a void in the literature about the driving forces behind U.S. bourbon whisky exports, especially justifying the impact of geographical indications and trade disputes, and (ii) examining global and regional trade efficiency and trade potential of U.S. bourbon whisky, considering consumer preferences. This study adopts the stochastic frontier gravity model and trade inefficiency model to analyze bourbon trade patterns between the U.S. and its primary bourbon trade partners over 1990–2019. Results reveal that economic size, income level, trade facilitation, common language and the weighted share of adults who drink in the importing country are important factors in boosting bourbon trade flows. As expected, U.S. bourbon’s geographical indication is playing a significant role in boosting bourbon exports. Trade disputes between the U.S. and its trading partners are found to have significantly negative impacts on U.S. bourbon exports. Our research also reveals that U.S. bourbon whisky has great potential to reach markets throughout the world, particularly in Europe, North America and Oceania.