IDEAS home Printed from https://ideas.repec.org/p/eec/wpaper/1901.html
   My bibliography  Save this paper

Energy Market Integration and Electricity Trade: A gravity model

Author

Listed:
  • Joan Batalla

    (Chair of Energy Sustainability (UB), University of Barcelona.)

  • Jordi Paniagua

    (Department of Economic Structure, University of Valencia, Avda. dels Tarongers s/n, 46022 Valencia (Spain).)

  • Elisa Trujillo

    (Chair of Energy Sustainability (UB), University of Barcelona.)

Abstract

This paper explores energy trade in the electrical market by proving a solid theoretical model along with a comprehensive empirical analysis. The model rests on standard goods trade gravity models, which we adapt to energy trade in the electrical market. We derive a tractable gravity equation, which we then estimate with standard gravity techniques. We use energy trade ows between European countries to quantify the effect of economic, structural, cultural and institutional variables on energy ows. The results reveal that energy trade determinants are similar to trade in goods, and that standard notion of international economics like comparative advantage emerge in energy economics. However, we observe some distinctive traits. Our results suggest that energy trade ows are mainly driven by demand at the importer due to an increase in economic activity and institutional agreements in the context of energy integration.

Suggested Citation

  • Joan Batalla & Jordi Paniagua & Elisa Trujillo, 2018. "Energy Market Integration and Electricity Trade: A gravity model," Working Papers 1901, Department of Applied Economics II, Universidad de Valencia.
    • Handle: RePEc:eec:wpaper:1901
    as

    Download full text from publisher

    File URL: http://repecsrv.uv.es/paper/RePEc/pdf/eec_1901.pdf
    File Function: First version, 2018
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Portes, Richard & Rey, Helene, 2005. "The determinants of cross-border equity flows," Journal of International Economics, Elsevier, vol. 65(2), pages 269-296, March.
    2. James E. Anderson & Eric van Wincoop, 2003. "Gravity with Gravitas: A Solution to the Border Puzzle," American Economic Review, American Economic Association, vol. 93(1), pages 170-192, March.
    3. Badi H. Baltagi & Peter Egger & Michael Pfaffermayr, 2014. "Panel Data Gravity Models of International Trade," CESifo Working Paper Series 4616, CESifo.
    4. Bergstrand, Jeffrey H. & Egger, Peter, 2007. "A knowledge-and-physical-capital model of international trade flows, foreign direct investment, and multinational enterprises," Journal of International Economics, Elsevier, vol. 73(2), pages 278-308, November.
    5. James E. Anderson & Yoto V. Yotov, 2010. "The Changing Incidence of Geography," American Economic Review, American Economic Association, vol. 100(5), pages 2157-2186, December.
    6. J. M. C. Santos Silva & Silvana Tenreyro, 2011. "poisson: Some convergence issues," Stata Journal, StataCorp LP, vol. 11(2), pages 215-225, June.
    7. McCallum, John, 1995. "National Borders Matter: Canada-U.S. Regional Trade Patterns," American Economic Review, American Economic Association, vol. 85(3), pages 615-623, June.
    8. James E. Anderson, 2011. "The Gravity Model," Annual Review of Economics, Annual Reviews, vol. 3(1), pages 133-160, September.
    9. Bunn, Derek W. & Gianfreda, Angelica, 2010. "Integration and shock transmissions across European electricity forward markets," Energy Economics, Elsevier, vol. 32(2), pages 278-291, March.
    Full references (including those not matched with items on IDEAS)

    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. Maria Teresa Costa-Campi & Jordi Paniagua & Elisa Trujillo-Baute, 2015. "Are energy market integrations a green light for FDI?," Working Papers 2015/18, Institut d'Economia de Barcelona (IEB).
    2. Head, Keith & Mayer, Thierry, 2014. "Gravity Equations: Workhorse,Toolkit, and Cookbook," Handbook of International Economics, in: Gopinath, G. & Helpman, . & Rogoff, K. (ed.), Handbook of International Economics, edition 1, volume 4, chapter 0, pages 131-195, Elsevier.
    3. Anderson, James E. & Borchert, Ingo & Mattoo, Aaditya & Yotov, Yoto V., 2018. "Dark costs, missing data: Shedding some light on services trade," European Economic Review, Elsevier, vol. 105(C), pages 193-214.
    4. repec:hal:spmain:info:hdl:2441/dambferfb7dfprc9m01g1j1k2 is not listed on IDEAS
    5. repec:spo:wpmain:info:hdl:2441/dambferfb7dfprc9m01g1j1k2 is not listed on IDEAS
    6. James E. Anderson, 2011. "The Gravity Model," Annual Review of Economics, Annual Reviews, vol. 3(1), pages 133-160, September.
    7. Agnosteva, Delina E. & Anderson, James E. & Yotov, Yoto V., 2019. "Intra-national trade costs: Assaying regional frictions," European Economic Review, Elsevier, vol. 112(C), pages 32-50.
    8. Juliana D. Araujo & Povilas Lastauskas & Chris Papageorgiou, 2017. "Evolution of Bilateral Capital Flows to Developing Countries at Intensive and Extensive Margins," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 49(7), pages 1517-1554, October.
    9. Mulabdic, Alen & Rotunno, Lorenzo, 2022. "Trade barriers in government procurement," European Economic Review, Elsevier, vol. 148(C).
    10. Jordi Paniagua, 2016. "A note on implementing gravity datasets with abundant zeros," Economics Bulletin, AccessEcon, vol. 36(1), pages 268-280.
    11. Anderson, James E. & Yotov, Yoto V., 2020. "Short run gravity," Journal of International Economics, Elsevier, vol. 126(C).
    12. Fally, Thibault, 2015. "Structural gravity and fixed effects," Journal of International Economics, Elsevier, vol. 97(1), pages 76-85.
    13. Emma Galli & Ilde Rizzo & Carla Scaglioni, 2020. "Is transparency spatially determined? An empirical test for Italian municipalities," Applied Economics, Taylor & Francis Journals, vol. 52(58), pages 6372-6385, December.
    14. Felbermayr, Gabriel & Yotov, Yoto V., 2021. "From theory to policy with gravitas: A solution to the mystery of the excess trade balances," European Economic Review, Elsevier, vol. 139(C).
    15. James E. Anderson & Catherine A. Milot & Yoto V. Yotov, 2011. "The Incidence of Geography on Canada's Services Trade," NBER Working Papers 17630, National Bureau of Economic Research, Inc.
    16. repec:hal:wpspec:info:hdl:2441/c8dmi8nm4pdjkuc9g70aj72cl is not listed on IDEAS
    17. repec:hal:wpspec:info:hdl:2441/dambferfb7dfprc9m01g1j1k2 is not listed on IDEAS
    18. Tamaş Anca, 2020. "Why should the gravity model be taught in business education?," Proceedings of the International Conference on Business Excellence, Sciendo, vol. 14(1), pages 422-433, July.
    19. Valeriano Martínez-San Román & Marta Bengoa & Blanca Sánchez-Robles, 2016. "Foreign direct investment, trade integration and the home bias: evidence from the European Union," Empirical Economics, Springer, vol. 50(1), pages 197-229, February.
    20. Nicolas Coeurdacier & Roberto A. De Santis & Antonin Aviat, 2009. "Cross-border mergers and acquisitions and European integration [‘Capital flows in a globalised world: The role of policies and institutions’]," Economic Policy, CEPR, CESifo, Sciences Po;CES;MSH, vol. 24(57), pages 56-106.
    21. repec:spo:wpecon:info:hdl:2441/dambferfb7dfprc9m01g1j1k2 is not listed on IDEAS
    22. Valentina Gullo & Pierluigi Montalbano, 2018. "Where does “dirty” money go? A gravity analysis," Working Papers 5/18, Sapienza University of Rome, DISS.
    23. Sigbjørn Sødal, 2017. "A Gravity Approach to Constructing Regional Structures from Interregional Flow Data," International Advances in Economic Research, Springer;International Atlantic Economic Society, vol. 23(4), pages 361-377, November.
    24. Antoine Gervais, 2018. "Estimating the impact of country‐level policy restrictions on services trade," Review of International Economics, Wiley Blackwell, vol. 26(4), pages 743-767, September.
    25. James E. Anderson & Mario Larch & Yoto V. Yotov, 2018. "GEPPML: General equilibrium analysis with PPML," The World Economy, Wiley Blackwell, vol. 41(10), pages 2750-2782, October.

    More about this item

    Keywords

    gravity equation; electricity trade; Energy Market Integration; European single market;
    All these keywords.

    JEL classification:

    • F20 - International Economics - - International Factor Movements and International Business - - - General
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • Q40 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - General
    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy

    NEP fields

    This paper has been announced in the following NEP Reports:

    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:eec:wpaper:1901. 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: Vicente Esteve (email available below). General contact details of provider: https://edirc.repec.org/data/dsvales.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.