The Economic Effects of Climate Change

The Economic Effects of Climate Change on California Winegrape Industry

Calanit Bar-Am
Daniel A. Sumner

We estimate relationships between weather, climate, characteristics and prices of wine grapes varieties grown in different climatic regions across 17 crush districts in California.  We use time series cross section data over several decades. Estimation is divided to three parts: weather and sugar content relationship, sugar content and grape price relationship, and weather, climate and grape price relationship.

We hypothesize that both weather and climate affect the price of wine grapes. Weather affects the vintage-to-vintage price, mainly through yield level, and climate affects the price through reputation. Furthermore, regions that grow varieties with similar characteristics are close substitutes such that prices of grapes are jointly determined. Therefore weather and climate that affect grape prices grown in a particular region may also affect prices of grapes grown in other regions. We use these historical relationships across regions and varieties to consider potential impacts of climate change on the winegrape industry.

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