High-end luxury wine demand and income inequality

Abstract

Purpose The purpose of this study is to explore the relationship between income inequality and the demand for high-end luxury wine. The consumption of luxury goods has experienced dramatic growth since 2000 but inequality has been neglected by scholars working on luxury consumption. The exploratory research focuses on wine demand between 2000 and 2019 and analyzes the impact of income inequality among other factors, including gross domestic product (GDP) per capita and GDP growth. The authors want to discern whether highly unequal countries import more expensive wine when compared to countries with lower inequality. Design/methodology/approach The authors prepared different data sets based on the year and the trade value of each country to compare the differences and commonalities. The regression models incorporate particular foreign trade statistics (average unit price of wine) as an objective variable and the Gini coefficients to measure the relation between the demand for high-end luxury wines and inequality as an explanatory variable. The models also incorporate other control variables such as economic and institutional conditions. Findings The analysis demonstrates a positive relationship between the unit price of imported wine and the level of income inequality of the importers. This research suggests that conspicuous consumption, as a means of social distinction, is a major driver of the luxury wine market. Other significant factors include GDP per capita and geographic proximity. However, countries with a high power distance and bad governance do not purchase more luxury wines than others. Hence, rather than the social acceptation of wealth and corruption, the consumption of luxury wines is driven by the levels of economic development and inequality. Originality/value This paper is exploratory research that discusses an underexplored issue: the impact of income inequality on the consumption of luxury goods such as high-end luxury wines. It contributes to the literature on wine consumption, luxury business and income and wealth inequalities. These fields are rarely approached together and the research emphasizes the potential offered by such a perspective.