Products associated with specific locations in Europe, such as Roquefort and Parma ham, are protected by the EU’s “geographical indications” regime. This ensures that these products can only be legally sold if they are produced in specified areas. As Riccardo Crescenzi, Fabrizio De Filippis, Mara Giua and Cristina Vaquero Piñeiro write, Geographical indications play a vital role for local development in rural areas with limited public spending. They offer protection against reproduction elsewhere, facilitate an upward effect on prices and quality reputation, and improve demographic trends and sectoral recomposition.
Geographical indications (GIs) granted by the European Union to recognize and certify products associated with a specific region of origin and traditional production techniques can provide tangible opportunities for local economic development in rural areas. By signaling global markets and protecting unique agri-food products from unfair competition, they provide opportunities for rural economies to connect to global markets while retaining their uniqueness. The locality, with its characteristics, history and traditions, becomes part of the product itself, making reproduction impossible elsewhere.
The most famous agrifood product that has benefited from Protected Designation of Origin (PDO) or Protected Geographical Indication (PGI) is wine. In a new study, we examine the role that GI wine can play in the development of the rural areas where it is produced. We find that rural areas where wine production is protected by a GI are experiencing a decline in population and a reorganization of the economy towards higher value-added activities compared to other rural areas with similar characteristics, but which cannot rely on the protection and recognition offered by GIs. In other words, Geographical Indications play a driving role for local development in rural areas with very limited public expenditure.
Our testimony comes from the case of Italy, one of the countries with the greatest number of Geographical Indications. We focus on GI wines, for which Italy plays a leading role worldwide. In particular, we are studying the impact of DOCG (Denominazione di Origine Controllata e Garantita) wines, the first category of Protected Designation of Origin wines in the country, on demographic trends and employment variation in the agricultural and non-agricultural sectors.
Figure 1: Map of Italian municipalities with and without DOCG wines
Source: Elaboration by the authors on the basis of data collected from the codes of practice of geographical indications (GIs).
In order to identify a causal impact, we use econometric models to compare communes with DOCG wines to a group of counterfactuals similar in all respects, but without recognized DOCG certification. This makes it possible to control for any time-invariant difference between “treated” (DOCG) and “control” municipalities, as well as for any time-varying aspect varying in a similar way between them, isolating the impact of GIs from any other factor. that could affect the results of interest.
Another relevant idea of our study is that participation in the IG system is a signal of strong local institutions. In order to be certified in the GI scheme, the product must pass a demanding set of tests regarding its uniqueness and its connection to the region of origin. This is validated if producers and local actors together obtain this result, a reflection of a strongly consolidated network of collaboration rooted in traditions. Because of these characteristics, the GI system can be seen as a policy tool that facilitates and enables the translation of local informal institutions into space-sensitive formal regulations that are globally recognized.
Our study demonstrates the value of a formal and globally recognized system that certifies the existence of distinct links with the region of origin of a product. The IG scheme creates areas with strong local institutions capable of maintaining and exploiting integrated production models to become competitive on global markets. This signaling tool can also have an upward effect on the price of products and their reputation for quality.
These effects translate into income for producers and for a large number of local actors. They also ultimately improve the attractiveness of territories for producers and all other economic players involved in the sector. This leads to positive effects in terms of demographic change and sectoral recomposition, which have been identified as traditional indicators of local development in rural areas.
With limited budgetary outlays, the EU can offer its rural areas the opportunity to participate and benefit from economic globalization by being (and staying) local. Geographical indications are establishing new global-local links. The region of origin of a product is exploited to differentiate it from other agri-food products, many of which are increasingly standardized and homogeneous.
Investing in integrated local production can offer unique opportunities to foster sustainable socio-economic development in rural areas. Relevant policy outcomes can be achieved by exploiting the potential economic characteristics specific to the territory and by supporting community-led expertise. Traditional capacities and practices must be preserved, while building new institutional bridges to global opportunities.
For more information, see the accompanying Authors’ Document at Regional Studies
Note: This article originally appeared on the LSE Global Investments & Local Development blog. It gives the point of view of the authors, and not the position of EUROPP – European Politics and Policy or of the London School of Economics. Featured Image Credit: Johny goerend to Unsplash