Champagne spillovers: Geographical indications and regional economic development

Abstract Geographical indications (GIs) are information signals based on a product’s geographical origin. They reduce information asymmetry for consumers and protect producers from imitation. This paper examines the local economic impact of GIs by focusing on the renowned Champagne AOC in France. Champagne is protected under the Appellation d’Origine Contrôlée (AOC), the EU’s strongest GI classification. My identification strategy leverages the fact that the municipal-level boundary of the Champagne AOC was historically determined by political decisions, rather than viticultural qualities (i.e., terroir ). Using granular geographic, economic, and fiscal data, I provide causal evidence that this institutional protection improves local economic outcomes beyond the wine sector. Despite a sharp increase in vineyard prices over the past two decades, there is no evidence of crowding out of other economic activity over time. These findings suggest that the projected expansion of the Champagne AOC could stimulate further regional economic development for newly admitted municipalities.