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The spatial delimitation of a geographical indication (GI) is at the heart of GI product specifications. Prior theoretical work suggests that the stipulated size of this delimited area affects prices of GI products. Larger delimited areas are expected to result in lower prices due to fewer quantity restrictions and lower average quality. However, this economic effect of GI areas has not been investigated broadly despite the regulatory importance of GI delimitations. With our study, we provide direct empirical evidence of the negative association between GI area size and retail prices.
Our main contributions to extant GI research are as follows. First, our econometric analyses are based on retail prices of GI hams and explicitly include the delimitations of GI areas in square kilometres. Second, we incorporate novel product-specific controls and highlight their relevance regarding GI premium estimations. Third, our pan-European analysis comprises a representative number of various raw hams from across the EU. Also, our sample includes all official EU origin-related food labels, i.e. Protected Designations of Origin (PDOs), Protected Geographical Indications (PGIs) and Traditional Specialties Guaranteed (TSGs).
We collected cross-sectional price data of more than 750 raw hams sold in online supermarkets operating in the capitals of 11 EU Member States, namely Austria, Belgium, France, Germany, Ireland, Italy, Luxembourg, the Netherlands, Portugal, Slovenia and Spain. Furthermore, we created a novel dataset of GI areas of 22 hams from 9 countries by measuring the size of the respective delimited area in square kilometres. While the smallest GI in our sample originates from an area of less than 35 square kilometres, the largest area goes beyond 20,000 square kilometres.
Fixed effect regressions on our full sample confirm that PDOs can achieve a price premium compared to uncertified hams, while there is no significant premium for typically larger PGIs. In general, the introduction of ham-specific controls such as maturation time and the use of special pig breeds significantly improves our estimates, suggesting that GI premiums ignoring such product-specific controls are biased.
Finally, regressions on our subsample of GI hams explicitly incorporate the size of GI areas in square kilometres. Our results indicate that for larger GI areas, prices are expected to be considerably lower as outlined by extant theory. Surprisingly, the comparative size of a GI is more influential than being regulated under a PGI or PDO specifically. Therefore, our study underscores that GI delimitations must be well-founded by producers and policy-makers as the size of a GI is a relevant price determinant in the EU ham market.
