The Economics of Geographical Indications: An Update

We discuss the economics of geographical indications (GIs), a form of collective branding of products based on their geographic origin. GIs serve as essential tools in addressing market failures stemming from information asymmetries and supporting the provision of high-quality products in competitive settings. They are increasingly used in wine and food markets. We briefly review the institutional development of GIs, discuss the basic economic theory arguments that rationalize the use of GIs, and characterize their key functions. We then examine the empirical evidence from studies that have probed various features of GIs. We find consensus on the potential for GIs to address a very real market failure and the positive role that policies and supporting institutions can play. We also uncover limitations and unresolved problems. GIs have both efficiency and distributional consequences, their international implications remain controversial, and tensions between tradition and innovation emerge while confronting new challenges such as climate change.