IDEAS home Printed from https://ideas.repec.org/a/aen/journl/2010v31-01-a08.html
   My bibliography  Save this article

Removing Policy-based Comparative Advantage for Energy Intensive Production: Necessary Adjustments of the Real Exchange Rate and Industry Structure

Author

Listed:
  • Torstein Bye
  • Erling Erling Holmoy

Abstract

Increased transmission capacity and diminishing returns to scale in power production capacities have raised the opportunity cost of electricity in many countries. The resulting market changes have often been counteracted by policy, i.e. subsidized electricity prices to for instance energy intensive industries. Firm data, emphasizing cost heterogeneity, confirm that a large share of Norwegian energy intensive firms would not be profitable in the long run if they lose their present electricity subsidies. However, CGE estimates show that removing the subsidies allows a tax cut that is more than sufficient to bring about the changes in relative prices needed to restore internal and external balances.

Suggested Citation

  • Torstein Bye & Erling Erling Holmoy, 2010. "Removing Policy-based Comparative Advantage for Energy Intensive Production: Necessary Adjustments of the Real Exchange Rate and Industry Structure," The Energy Journal, International Association for Energy Economics, vol. 0(Number 1), pages 177-198.
    • Handle: RePEc:aen:journl:2010v31-01-a08
    as

    Download full text from publisher

    File URL: http://www.iaee.org/en/publications/ejarticle.aspx?id=2363
    Download Restriction: Access to full text is restricted to IAEE members and subscribers.
    ---><---

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    References listed on IDEAS

    as
    1. Andrew B. Bernard & Jonathan Eaton & J. Bradford Jensen & Samuel Kortum, 2003. "Plants and Productivity in International Trade," American Economic Review, American Economic Association, vol. 93(4), pages 1268-1290, September.
    2. Tor Jakob Klette, 1999. "Market Power, Scale Economies and Productivity: Estimates from a Panel of Establishment Data," Journal of Industrial Economics, Wiley Blackwell, vol. 47(4), pages 451-476, December.
    3. Kehoe, Timothy J., 2002. "An Evaluation of the Performance of Applied General Equilibrium Models of the Impact of NAFTA," Conference papers 331066, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    4. Bernard, Andrew B. & Bradford Jensen, J., 1999. "Exceptional exporter performance: cause, effect, or both?," Journal of International Economics, Elsevier, vol. 47(1), pages 1-25, February.
    5. Lindquist, Kjersti-Gro, 1995. "The Existence of Factor Substitution in the Primary Aluminum Industry: A Multivariate Error-Correction Approach Using Norwegian Panel Data," Empirical Economics, Springer, vol. 20(3), pages 361-383.
    6. Fabio Ghironi & Marc J. Melitz, 2005. "International Trade and Macroeconomic Dynamics with Heterogeneous Firms," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 120(3), pages 865-915.
    7. Marc J. Melitz, 2003. "The Impact of Trade on Intra-Industry Reallocations and Aggregate Industry Productivity," Econometrica, Econometric Society, vol. 71(6), pages 1695-1725, November.
    8. Andrew B. Bernard & J. Bradford Jensen, 2004. "Why Some Firms Export," The Review of Economics and Statistics, MIT Press, vol. 86(2), pages 561-569, May.
    9. Sachs, J-D & Warner, A-M, 1995. "Natural Resource Abundance and Economic Growth," Papers 517a, Harvard - Institute for International Development.
    10. Ben J Heijdra & Christian Keuschnigg & Wilhelm Kohler, 2014. "Eastern Enlargement of the EU: Jobs, Investment and Welfare in Present Member Countries," World Scientific Book Chapters, in: European Economic Integration, WTO Membership, Immigration and Offshoring, chapter 2, pages 37-83, World Scientific Publishing Co. Pte. Ltd..
    11. Hausmann, Ricardo & Rodrik, Dani, 2003. "Economic development as self-discovery," Journal of Development Economics, Elsevier, vol. 72(2), pages 603-633, December.
    12. John Sutton, 1997. "Gibrat's Legacy," Journal of Economic Literature, American Economic Association, vol. 35(1), pages 40-59, March.
    13. Venables, Anthony J, 1996. "Equilibrium Locations of Vertically Linked Industries," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 37(2), pages 341-359, May.
    14. Krugman, Paul, 1991. "Increasing Returns and Economic Geography," Journal of Political Economy, University of Chicago Press, vol. 99(3), pages 483-499, June.
    15. repec:rus:hseeco:122439 is not listed on IDEAS
    16. Wilhelm Kohler & Christian Keuschnigg, 2000. "An Incumbent Country View on Eastern Enlargement of the EU Part I: A General Treatment," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 27(4), pages 325-351, December.
    17. Aw, Bee Yan & Chung, Sukkyun & Roberts, Mark J, 2000. "Productivity and Turnover in the Export Market: Micro-level Evidence from the Republic of Korea and Taiwan (China)," The World Bank Economic Review, World Bank, vol. 14(1), pages 65-90, January.
    18. Torvik, Ragnar, 2001. "Learning by doing and the Dutch disease," European Economic Review, Elsevier, vol. 45(2), pages 285-306, February.
    19. A. Bovenberg, 1999. "Green Tax Reforms and the Double Dividend: an Updated Reader's Guide," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 6(3), pages 421-443, August.
    20. Alven H.S. Lam, 2000. "Republic of China (Taiwan)," American Journal of Economics and Sociology, Wiley Blackwell, vol. 59(5), pages 327-336, November.
    21. Matsen, Egil & Torvik, Ragnar, 2005. "Optimal Dutch disease," Journal of Development Economics, Elsevier, vol. 78(2), pages 494-515, December.
    22. Lawrence Goulder, 1995. "Environmental taxation and the double dividend: A reader's guide," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 2(2), pages 157-183, August.
    23. Wilhelm Kohler & Chrisran Keuschnigg, 2001. "An Incumbent Country View on Eastern Enlargement of the EU. Part II: The Austrian Case," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 28(2), pages 159-185, June.
    24. H. S. Houthakker, 1955. "The Pareto Distribution and the Cobb-Douglas Production Function in Activity Analysis," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 23(1), pages 27-31.
    25. Francois, Joseph & van Tongeren, Frank & van Meijl, Hans, 2003. "Trade Liberalization and Developing Countries Under the Doha Round," CEPR Discussion Papers 4032, C.E.P.R. Discussion Papers.
    26. Erling Holmøy & Torbjørn Hægeland, 1997. "Aggregate Productivity Effects of Technology Shocks in a Model of Heterogeneous Firms: The Importance of Equilibrium Adjustments," Discussion Papers 198, Statistics Norway, Research Department.
    27. Adam Hersh & Christian Weller, 2003. "Does Manufacturing Matter?," Challenge, Taylor & Francis Journals, vol. 46(2), pages 59-79.
    28. Huttunen, Kristiina & Moen, Jarle & Salvanes, Kjell G., 2006. "How Destructive Is Creative Destruction? The Costs of Worker Displacement," IZA Discussion Papers 2316, Institute of Labor Economics (IZA).
    29. Andrew Bernard & Joachim Wagner, 2001. "Export entry and exit by German firms," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 137(1), pages 105-123, March.
    30. Truman F. Bewley, 1997. "Why Not Cut Pay?," Cowles Foundation Discussion Papers 1167, Cowles Foundation for Research in Economics, Yale University.
    31. repec:dgr:rugccs:200213 is not listed on IDEAS
    32. Joel Popkin & Kathryn Kobe, 2003. "Securing America's Future," Challenge, Taylor & Francis Journals, vol. 46(6), pages 62-109.
    33. Tor Jakob Klette & Arvid Raknerud, 2005. "Heterogeneity, productivity and selection: an empirical study of Norwegian manufacturing firms," Discussion Papers 401, Statistics Norway, Research Department.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Billette de Villemeur, Etienne & Pineau, Pierre-Olivier, 2012. "Regulation and electricity market integration: When trade introduces inefficiencies," Energy Economics, Elsevier, vol. 34(2), pages 529-535.
    2. Bye Brita & Faehn Taran & Grünfeld Leo A., 2011. "Growth and Innovation Policy in a Small, Open Economy: Should You Stimulate Domestic R&D or Exports?," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 11(1), pages 1-41, July.
    3. Førsund, Finn R. & Vislie, Jon, 2016. "Leif Johansen on intra-industry structural change," Journal of Policy Modeling, Elsevier, vol. 38(3), pages 515-527.
    4. Førsund, Finn R. & Hjalmarsson, Lennart, 2008. "Dynamic Analysis of Structural Change and Productivity Measurement," Memorandum 27/2008, Oslo University, Department of Economics.
    5. Kiula, Olga & Markandya, Anil & Ščasný, Milan & Menkyna Tsuchimoto, Fusako, 2014. "The Economic and Environmental Effects of Taxing Air Pollutants and CO2: Lessons from a Study of the Czech Republic," MPRA Paper 66599, University Library of Munich, Germany, revised Oct 2015.
    6. R. Førsund, Finn & Vislie, Jon, 2011. "From Macro Growth to Disaggregated Production Studies," Memorandum 22/2011, Oslo University, Department of Economics.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Torstein Bye & Erling Holmϕy, 2010. "Removing Policy-based Comparative Advantage for Energy Intensive Production: Necessary Adjustments of the Real Exchange Rate and Industry Structure," The Energy Journal, , vol. 31(1), pages 177-198, January.
    2. Erling Holmøy & Kim Massey Heide, 2005. "Is Norway immune to Dutch Disease? CGE Estimates of Sustainable Wage Growth and De-industrialisation," Discussion Papers 413, Statistics Norway, Research Department.
    3. Kichun Kang & Phyllis Keys & Yoon S. Shin, 2016. "Free Trade Agreements And Bridgehead Effect: Evidence From Korea–Chile Fta," The Singapore Economic Review (SER), World Scientific Publishing Co. Pte. Ltd., vol. 61(05), pages 1-17, December.
    4. Peter Gustafsson & Paul Segerstrom, 2010. "Trade Liberalization and Productivity Growth," Review of International Economics, Wiley Blackwell, vol. 18(2), pages 207-228, May.
    5. Anne Marie Gleeson & Frances Ruane, 2007. "Heterogeneous Exporter Behaviour: Exploring the Evidence for Sunk-Costs and Hysteresis," Papers WP196, Economic and Social Research Institute (ESRI).
    6. Ricardo A. López, 2009. "Do Firms Increase Productivity in Order to Become Exporters?," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 71(5), pages 621-642, October.
    7. Łukasz Matuszczak, 2019. "Międzynarodowy handel usługami polskich przedsiębiorstw," Gospodarka Narodowa. The Polish Journal of Economics, Warsaw School of Economics, issue 1, pages 47-67.
    8. Donato de Rosa, 2006. "Explaining Russian manufacturing exports: Firm characteristics and external conditions," PSE Working Papers halshs-00590449, HAL.
    9. Kondo, Hiroki, 2013. "International R&D subsidy competition, industrial agglomeration and growth," Journal of International Economics, Elsevier, vol. 89(1), pages 233-251.
    10. Elhanan Helpman, 2010. "Labor Market Frictions as a Source of Comparative Advantage, with Implications for Unemployment and Inequality," NBER Working Papers 15764, National Bureau of Economic Research, Inc.
    11. Paul S. Segerstrom & Ignat Stepanok, 2018. "Learning How To Export," Scandinavian Journal of Economics, Wiley Blackwell, vol. 120(1), pages 63-92, January.
    12. Kasahara, Hiroyuki & Lapham, Beverly, 2013. "Productivity and the decision to import and export: Theory and evidence," Journal of International Economics, Elsevier, vol. 89(2), pages 297-316.
    13. Dutt, Pushan & Mihov, Ilian & Van Zandt, Timothy, 2013. "The effect of WTO on the extensive and the intensive margins of trade," Journal of International Economics, Elsevier, vol. 91(2), pages 204-219.
    14. Ma, Yue & Tang, Heiwai & Zhang, Yifan, 2014. "Factor Intensity, product switching, and productivity: Evidence from Chinese exporters," Journal of International Economics, Elsevier, vol. 92(2), pages 349-362.
    15. Cassiman, Bruno & Golovko, Elena, 2007. "Innovation and the export-productivity link," IESE Research Papers D/688, IESE Business School.
    16. Joachim Wagner, 2016. "Exports and Productivity: A Survey of the Evidence from Firm Level Data," World Scientific Book Chapters, in: Microeconometrics of International Trade, chapter 1, pages 3-41, World Scientific Publishing Co. Pte. Ltd..
    17. Elhanan Helpman, 2006. "Trade, FDI, and the Organization of Firms," Journal of Economic Literature, American Economic Association, vol. 44(3), pages 589-630, September.
    18. Xiang Hui, 2020. "Facilitating Inclusive Global Trade: Evidence from a Field Experiment," Management Science, INFORMS, vol. 66(4), pages 1737-1755, April.
    19. Dalgic, Basak & Fazlioglu, Burcu & Gasiorek, Michael, 2015. "Costs of trade and self-selection into exporting and importing: The case of Turkish manufacturing firms," Economics - The Open-Access, Open-Assessment E-Journal (2007-2020), Kiel Institute for the World Economy (IfW Kiel), vol. 9, pages 1-28.
    20. Okubo, Toshihiro, 2009. "Trade liberalisation and agglomeration with firm heterogeneity: Forward and backward linkages," Regional Science and Urban Economics, Elsevier, vol. 39(5), pages 530-541, September.

    More about this item

    JEL classification:

    • F0 - International Economics - - General

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:aen:journl:2010v31-01-a08. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: David Williams (email available below). General contact details of provider: https://edirc.repec.org/data/iaeeeea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.