The Value of Good Neighbors: A Spatial Analysis of the California and Washington State Wine Industries

The fact that wineries tend to cluster can be partially explained by the terroir of those areas. However, a gap in our understanding of the spatial relationships among wineries remains. In this article, winery-level data from California and Washington State with GIS coordinates are utilized to examine the spatial relationships among neighboring wineries. Spatial effects are assessed by performing clustering tests based on wine prices and tasting scores. A spatial-lag model is then estimated to test whether there are positive effects from neighbors in a hedonic price estimation. The results indicate that strong and positive neighbor effects are present.