The impact of direct to consumer shipping laws on the number and size distribution of U.S. wineries

The changing legislative landscape of the U.S. wine market provides a scenario to examine the effect of regulation on the size distribution of firms. Using the variation across states and time in the sum of in-state and out-of-state adult populations between 2002-2017, and a difference in difference-style empirical model, I examine how restrictions on Direct to Consumer (DTC) sales impact the number of establishments and the employment at wineries. I find that the expansion of the potential wine market by 10 M adults caused about a 3.5% increase in the number of wineries. While reduced DTC restrictions explain growth in the number of wineries, I find no effect of lessened restrictions on the number of winery employees, though there is evidence of a lagged effect. Additionally, I find that the growth of smaller wineries substantially outpaces that of larger wineries when regulations are lessened. These results suggest that regulatory barriers in particular industries may allow states to maintain an artificial size distribution.

Automated summary

The study examines how regulations impact the size distribution of firms in the U.S. wine market by analyzing the changing legislative landscape. The findings suggest that an expansion of the potential wine market leads to an increase in the number of wineries, attributing the growth to reduced Direct to Consumer (DTC) sales restrictions. However, there is no immediate effect on winery employment, but a lagged effect is observed. The study also highlights that smaller wineries experience significant growth compared to larger ones when regulations are lessened.