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THE ECONOMICS OF INTRODUCING WINE INTO GROCERY STORES

Authors

  • BRADLEY J. RICKARD

    1. Rickard: Assistant Professor, Charles H. Dyson School of Applied Economics and Management, Cornell University, Ithaca, NY 14853. Phone +1.607.255.7417, Fax +1.607.255.9984, E-mail bjr83@cornell.edu
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    • The author gratefully acknowledges valuable input provided by an anonymous reviewer and by editor Robert Michaels, and would like to thank, without implicating, David Lee, Marco Costanigro, Tim Martinson, Marc Smith, and Jerry White for helpful comments and discussions.


Abstract

The repeal of the Prohibition Act in 1933 introduced many state-specific regulations in wine markets. For example, 15 states currently have laws that restrict wine sales in grocery stores. Several of these states have proposed changes that would expand the distribution of wine; however, the proposals have met significant resistance from key stakeholders and none have resulted in legislation. It is widely expected that additional proposals will be initiated, but with more attention given to mechanisms that would address some of the transitional issues. A simulation model is developed here to assess the likely economic effects of introducing wine into grocery stores in New York State. Results indicate that tax revenue would increase by $22 million annually, revenue for in-state wineries would increase by approximately 13%, and revenue for liquor store owners is calculated to fall by 28%. Simulation results are subsequently used to develop a framework for evaluating the transitional costs of policy reform in this highly regulated industry. (JEL K23, Q18)

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