nep-cis New Economics Papers
on Confederation of Independent States
Issue of 2012‒11‒17
two papers chosen by
Alexander Harin
Modern University for the Humanities

  1. The EU-Russia Gas Relationship: a mutual dependency By Le Coq, Chloe; Paltseva, Elena
  2. Structural Estimation of a Flexible Translog Gravity Model By Shawn Tan

  1. By: Le Coq, Chloe (Stockholm Institute of Transition Economics); Paltseva, Elena (New Economic School, Moscow)
    Abstract: Current debate on the energy security in the EU often stresses the EU dependency on gas imports from Russia. However, Russia is no less dependent on the EU – more than half of its gas exports goes to Europe. The purpose of this paper is to characterize this mutual dependency through an index-based approach, and to discuss how the development of gas markets may affect such dependency. We suggest a unified framework to assess the security of gas supply for the EU and the security of gas demand for Russia, and construct dependency indexes for both parties. Our approach accounts not only for the traditional import/export dependency measures but also for the balance of power between Russia and the EU. The proposed methodology is then used to address the evolution of the EU-Russia gas relationship in the view of gas market’s developments. New gas pipelines projects (e.g., South Stream, Nabucco) and increasing use of liquefied natural gas are all likely to impact both the demand side and the supply side of the EU-Russia gas trade, and affect mutual gas dependency between the EU and Russia.
    Keywords: Energy Security; European Union; Gas transit risks; Index; Russia.
    JEL: C81 Q40 Q48
    Date: 2012–09–01
  2. By: Shawn Tan
    Abstract: How large are the gains from trade? Do all trade models have the ‘same old gains’? Arkolakis, Costinot, and Rodriguez-Clare (2012) show that many quantitative trade models that summarize trade responses via a single elasticity have the same welfare implications. I develop a flexible approach to estimating trade responses using a translog expenditure function, and find welfare results that differ starkly from conventional trade models. In my model, trade responses can vary bilaterally, and the link between own- and cross-price elasticities of trade to trade cost is broken. I apply my approach to inter-regional trade flows in North America and international trade flows between OECD and BRICS countries. I structurally estimate the parameters and conduct counterfactual analyses. Canada’s border effect is at least three times smaller than estimates in previous literature. Compared to those implied by the formula in Arkolakis et al., welfare responses are larger and more heterogeneous. The welfare losses from raising trade barriers are underestimated by eight times for China, France, India, and the United Kingdom, and underestimated by more than ten times for Australia, Brazil, Canada, and Russia.
    Keywords: Gravity model, Translog expenditure function, Structural estimation, Gains from
    Date: 2012

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