Department of Economics and Statistics "Cognetti de Martiis"

Project description

According to the 2010 Agricultural Census, there were about 23,000 vine-growing farms in Piedmont. Like in other countries and areas, there are different chains between vine-growing and wine-making: commercial or wine industry companies buying from vine-growers; vine-growers making their own wine on the farm; vine growers conveying their grapes to co-operatives.

Vine growers face the choice whether to sell the grapes or to process them to make wine on the farm. We intend to investigate the determinants of this choice.

Theoretical framework: in wine production technology, marginal product of inputs is presumably constant, given the plant. Hence, the quantity of processed wine (W)       

W > 0 if:

p_wa₁y_g – Ʃp_xib_1iy_g – w_b2y_g > p_gy_g                                                 (1)

or, dividing by y_g:     

p_wa₁ – p_g Ʃp_xib_1i – w_b2 > 0                                                               (2)

where p_g, p_w, and p_xi are, respectively, the prices of grape, wine, and variable input i, a₁ is the technical transformation coefficient of grape into wine, b_1i and b₂ are the technical coefficients of variable input i and of labour, and w is the unit cost of labour. For estimation, the price difference at the farm level (p_wa₁  - p_g  ) is assumed to be a linear function of the price difference at the regional level, and of technical, wine-making and marketing skills, proxied by observable personal characteristics of farm operators and of family members. Variable inputs unit costs are assumed to linearly depend on observable characteristics of wine-making farms. Labour costs can depend on the opportunity cost of labour (and, hence, on personal characteristics) or, in addition, on household characteristics, if labour cost is subjective.

Data on farm, household and personal characteristics are drawn from individual data of the 2010 Agricultural Census, wine and grapes price data from the statistics of the Chambers of Commerce of Asti and Cuneo.

The model will be estimated as a probit, using as the dichotomous dependent variable the farm having sold wine, and as explanatory variables those indicated above.

Results and publications

S. Mazzarino, A. Corsi, I flussi dell'uva verso la vinificazione: un'analisi comparata per regioni e macroaree, Economia Agro-Alimentare, FrancoAngeli, n. 1, 2015