2. Model Construction
This paper chooses nine energy-intensive industries which most influenced by the carbon tax policy, using improved gravity model to measure the impact of carbon tax on selected 21 OECD countries exports. By adding carbon tax policy variables, the model was constructed for three cases on the basis of a standard gravity model and the improvement of the model by Harris, Kónya, Mátyás (2002) and World Bank (2008): only exporting country levies carbon tax, only the import country levy carbon tax, both of them have carbon tax. Gravity model originated in "law of attraction" in the physics proposed by Newton in 1687, that is, the gravitational force between two objects is proportional to the quality and inversely proportional to the distance. Tinbergen (1962) and Poyhonen (1963) began to use gravity model in the research of international trade issue. Through empirical research they found that trade flows between the two economies is proportional to their individual economies scale (usually represented by GDP) and is inversely proportional to the distance between them. The initial equation of gravity model is:
˄1˅
In this equation, A denotes a constant, Tij is trade value between regions or countries, Yi and Yj are the economic scales of two countries or regions, usually using a country's GDP, Dij is economic distance between the two countries, generally refers to the distance between two economic centers or major ports. Among this, Yi represents the potential supply of the exporting country and Yj measures the potential demand of the importing country, Dij is a proxy for resistance to trade. In the empirical test, they are usually taken logarithmic into linear form. This model has been successfully verified by many scholars’ empirical studies latterly and it is a powerful tool for analyzing bilateral trade flows. Compared with various trade theories, the trade gravity model quantified the bilateral trade between two countries or regions, opening up a space for econometric analysis in international trade. For the extending use of trade gravity model, economists mainly modify original model through introducing new explanatory variables, which could be divided into two categories: one is exogenous variables affecting trade, such as GDP, population, per capita GDP, per capita income (PCY), etc.; the other is dummy variables, such as preferential trade agreements, integration organizations, the common language, etc. Linnemann (1966) applied the gravity model to measure the trade flows between the two countries by introducing two new explanatory variables, which are the endogenous variable(population) and the dummy variable(trade policies, such as preferential trade agreements). Casetti (1972) proposed extension methods in qualitative research through combining two series of exogenous variables Y0 (basic
2. Model Construction
This paper chooses nine energy-intensive industries which most influenced by the carbon tax policy, using improved gravity model to measure the impact of carbon tax on selected 21 OECD countries exports. By adding carbon tax policy variables, the model was constructed for three cases on the basis of a standard gravity model and the improvement of the model by Harris, Kónya, Mátyás (2002) and World Bank (2008): only exporting country levies carbon tax, only the import country levy carbon tax, both of them have carbon tax. Gravity model originated in "law of attraction" in the physics proposed by Newton in 1687, that is, the gravitational force between two objects is proportional to the quality and inversely proportional to the distance. Tinbergen (1962) and Poyhonen (1963) began to use gravity model in the research of international trade issue. Through empirical research they found that trade flows between the two economies is proportional to their individual economies scale (usually represented by GDP) and is inversely proportional to the distance between them. The initial equation of gravity model is:
˄1˅
In this equation, A denotes a constant, Tij is trade value between regions or countries, Yi and Yj are the economic scales of two countries or regions, usually using a country's GDP, Dij is economic distance between the two countries, generally refers to the distance between two economic centers or major ports. Among this, Yi represents the potential supply of the exporting country and Yj measures the potential demand of the importing country, Dij is a proxy for resistance to trade. In the empirical test, they are usually taken logarithmic into linear form. This model has been successfully verified by many scholars’ empirical studies latterly and it is a powerful tool for analyzing bilateral trade flows. Compared with various trade theories, the trade gravity model quantified the bilateral trade between two countries or regions, opening up a space for econometric analysis in international trade. For the extending use of trade gravity model, economists mainly modify original model through introducing new explanatory variables, which could be divided into two categories: one is exogenous variables affecting trade, such as GDP, population, per capita GDP, per capita income (PCY), etc.; the other is dummy variables, such as preferential trade agreements, integration organizations, the common language, etc. Linnemann (1966) applied the gravity model to measure the trade flows between the two countries by introducing two new explanatory variables, which are the endogenous variable(population) and the dummy variable(trade policies, such as preferential trade agreements). Casetti (1972) proposed extension methods in qualitative research through combining two series of exogenous variables Y0 (basic
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