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Trade-facilitated technology spillovers in energy productivity convergence processes across EU countries

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  • Wan, Jun
  • Baylis, Kathy
  • Mulder, Peter

Abstract

This empirical paper tests for trade-facilitated spillovers in the convergence of energy productivity across 16 European Union (EU) countries from 1995 to 2005. One might anticipate that by inducing specialization, trade limits the potential for convergence in energy productivity. Conversely, by inducing competition and knowledge diffusion, trade may spur sectors to greater energy productivity. Unlike most previous work on convergence, we explain productivity dynamics from cross-country interactions at a detailed sector level and apply a spatial panel data approach to explicitly account for trade-flow related spatial effects in the convergence analysis. Our study confirms the existence of convergence in manufacturing energy productivity, caused by efficiency improvements in lagging countries, while undermined by increasing international differences in sector structure. Further, we find that trade flows explain 30 to 40% of the unobserved variation in energy productivity. Trade continues to explain the unobserved variation in energy productivity even after accounting for geographic proximity. Last, we find that those countries and sectors with higher dependence on trade both have higher energy productivity growth and a higher rate of convergence, further implying that trade can enhance energy productivity. Thus, unlike concerns that trade may spur a ‘race to the bottom’, we find that promoting trade may help stimulate energy efficiency improvements across countries.

Suggested Citation

  • Wan, Jun & Baylis, Kathy & Mulder, Peter, 2015. "Trade-facilitated technology spillovers in energy productivity convergence processes across EU countries," Energy Economics, Elsevier, vol. 48(C), pages 253-264.
  • Handle: RePEc:eee:eneeco:v:48:y:2015:i:c:p:253-264
    DOI: 10.1016/j.eneco.2014.12.014
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    More about this item

    Keywords

    Energy productivity; Convergence; Spillovers; Technology transfer; Sector analysis; Spatial panel;
    All these keywords.

    JEL classification:

    • C21 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
    • O5 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies
    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy

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