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

Jun Wan, Katherine R Baylis, Peter Mulder

Research output: Contribution to journalArticle

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.

Original languageEnglish (US)
Pages (from-to)253-264
Number of pages12
JournalEnergy Economics
Volume48
DOIs
StatePublished - Mar 1 2015

Keywords

  • Convergence
  • Energy productivity
  • Sector analysis
  • Spatial panel
  • Spillovers
  • Technology transfer

ASJC Scopus subject areas

  • Economics and Econometrics
  • Energy(all)

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