Trade causing net loss
A TIMES user approached me with an interesting question (shortened by me):
Undisclosed TIMES user Wrote:We have modelled power system of two countries in TIMES. We have two stand-alone models, and then we have one integrated TIMES model for analysing trade. In the integrated model, we have an inter-connection technology that transmits power between two countries. When we run the trade case, the second country makes much higher expenses in its power system (to produce export quantity), than it earns from its export revenues, causing a net loss.

It would be difficult to communicate the result to the policy/decision makers. No country would be interested to export if there is an economic loss. The exporting country needs to make some gains from its export revenue, if export needs to happen in reality. It would be good to show trade benefits for both countries; while one benefits from cheap electricity, the other gains from export earnings. However, it is not that case here.

TIMES is used for multi-regional modelling in several occasions. Is there any option available in the model to deal with a trade case to get a win-win situation for both countries?
I responded to the user by saying that such a loss from trade should not be possible. According to my understanding, under a competitive equilibrium (such as in TIMES), any voluntary trades (i.e. not forced ones) should be guaranteed to be Pareto efficient. But as I am not a very proficient economist, I decided to present the question here and ask for others' opinions.  So, if you have any insights about this issue, please comment.   Smile

Messages In This Thread
Trade causing net loss - by Antti-L - 30-07-2017, 11:08 PM
RE: Trade causing net loss - by Pernille.S - 31-07-2017, 05:05 PM
RE: Trade causing net loss - by Antti-L - 31-07-2017, 11:27 PM

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