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Energy Market Integration and Electricity Trade: A gravity model

Author

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  • 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

  • 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
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    More about this item

    Keywords

    gravity equation; electricity trade; Energy Market Integration; European single market;

    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

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