Country of origin advertising and US demand of imported wine: an empirical analysis

Abstract

We investigate the impact of media advertising on the US consumption of imported wine. Panel data from six countries over 15 years (1994–2008) are used to estimate an aggregate demand function for US wine imports. Our empirical analysis reveals evidence of important effects of advertising of domestic and imported wines on imported quantities; the advertising of imported wines significantly increases the quantity of imports for most countries while the advertising of domestic wines has a mixed effect on imported wine volumes. Other determinants such as price and real income are also found significant.

Keywords:

• media advertising
• import wine
• domestic wine
• panel data

JEL Classification:

• C20
• Q11

Notes

Senior authorship is equally shared between the authors.

¹ For example, Gallet (2007) reports 72 estimations of the effect of advertising on alcohol demand using double-log models.

² We also used a Media Index to deflate our two advertising variables; the results of our estimations are similar to those obtained when the CPI is used as a deflator. Therefore, only the results using the CPI as a deflator are presented.

³ For Australia, we obtain the multiplier as follows: 1/(1–0.244) = 1.32.

⁴ We attempted to control for both time trend and GDP in our regression. However, doing so results in insignificant coefficients for both GDP and the time trend variable due to multicollinearity.