Wine price trends

ECONOMICS is a highly specialised field. There is, for instance, an economics journal dedicated entirely to the economics of wine (aptly called the Journal of Wine Economics). A recent paper in that journal examined the effect of globalisation on American wine consumers. It turns out trade in wine has been a boon for American oenophiles:

For instance, the real price (in 1988 prices) for the basket of the entire Top 100 list [for the U.S.] was $4,313 in 1988; $3,132 in 1993; $2,533 in 1999; and $2,421 in 2004. That is nearly a 44% decrease in prices from 1988 to 2004. At the same time, there was no significant change in the quality of the wines on the Top 100 list...

Our econometric analyses show that the decreasing wine price over the past 17 years can be explained by the loss of shares of the Old World countries: Replacing a French wine with a U.S. wine lowers the average real price by 1.0%; an Australian wine by 1.1%; and a wine from non-incumbent countries by 1.5%. To put it differently, replacing an Old World wine (French, Italian, etc.) with a New World wine (US, Australia etc.) lowers the average real price by 1%. Replacing an Old World wine with a New-New World wine (Chile, South Africa etc.) lowers the average real price by 2.5%. The increased presence of newcomers puts significant downward pressure on prices.

Fascinating, but one question immediately comes to mind. What has recent dollar weakness meant for American wine drinkers? Less wine for the money, it seems. The real price of wine increased in 2004 and 2005 (the last year for which data was published). It's quite likely that trend has continued in subsequent years. What would be particularly interesting to know is whether the dollar's decline has boosted consumption, domestically and globally, of American wines, and whether that increased demand has affected the quality of American wine production.