Working Paper: NBER ID: w16037
Authors: Orley C. Ashenfelter; Karl Storchmann
Abstract: In this paper we measure the effect of year to year changes in the weather on wine prices and winery revenue in the Mosel Valley in Germany in order to determine the effect that climate change is likely to have on the income of wine growers. A novel aspect of our analysis is that we compare the estimates based on auction, retail, and wholesale prices. \n\nAlthough auction prices are based on actual transactions, they provide a thick market only for high quality, expensive wines and may overestimate climate's effect on farmer revenues. Wholesale prices, on the other hand, do provide broad coverage of all wines sold and probably come closest to representing the revenues of farmers. Overall, we estimate a 1°C increase in temperature would yield an increase in farmer revenue of about 30 percent.
Keywords: global warming; viticulture; wine prices; climate change; Mosel Valley
JEL Codes: D44; L66; Q1; Q5; Q51
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Temperature changes (E39) | Vineyard profitability (Q15) |
| Temperature changes (E39) | Wine prices (P22) |
| Temperature changes (E39) | Wine quality (L15) |
| Wine quality (L15) | Wine prices (P22) |
| 1°C increase in temperature (Q54) | 30% increase in farmer revenue (Q16) |
| 3°C increase in temperature (Q54) | More than double vineyard values (Q15) |
| Auction price models (D44) | Overestimate impact of temperature changes (Q54) |
| Retail and wholesale price models (L11) | Revenue increases between 27% and 37% per degree Celsius (Q54) |