January 30, 2011

Energy Abundance, Trade and Industry Location

by Reyer Gerlagh and Nicole A. Mathys

- We study the effect of countries’ energy abundance on trade and sector activity, conditional on sector’s energy intensity, using an unbalanced panel with 14 high-income countries from Europe, America and Asia, 10 broad sectors, and years 1970-1997. We find that energy is a major driver for sector location through specialisation. We show that capital and energy are complements in the production function and use various controls in our analysis. The results give insights into delocalisation effects that may take place among rich countries with heterogeneous energy policy.

Gerlagh, R. and N.A. Mathys (2011). "Energy Abundance, Trade and Industry Location." FEEM Note di lavoro No. 2011.003, Jan 2011.