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Research Details
The Extent of the Market and Integration through Factor Markets: Evidence from Wholesale Electricity, Economic Inquiry
Abstract
We document the influence of factor markets in determining the extent of the market, appealing to the Mundell hypothesis that trade in goods and factor markets are substitutes. We confirm this influence using the U.S. wholesale market for electric power. Although the Eastern,Western, and Texas regions cannot trade electricity, inputs such as natural gas move freely across these regions. Through a set of price transmission ratios, and a supply model for natural gas, we find regional electricity shocks do propagate across regions. We conclude output markets institutionally in autarky achieve modest degrees of economic integration through factor markets.
Type
Article
Author(s)
R Andrew Butters, Daniel Spulber
Date Published
2020
Citations
Butters, R Andrew, and Daniel Spulber. 2020. The Extent of the Market and Integration through Factor Markets: Evidence from Wholesale Electricity. Economic Inquiry.(3): 1076–1108.