The Future Flow of Goods in the Enlarged EU

1. The Future Flow of Goods in the Enlarged EU Ole Kveiborg & Stéphanie Vincent Lyk-Jensen Danish Transport Research Institute The future flow of goods in the enlarged EU

2. Contents • Motivation • Overall methodology • From trade flows to freight flows • Data • Empirical specification of the model • Results • For Western European countries • For Central and Eastern European countries • Conclusion The future flow of goods in the enlarged EU

3. Motivation • Globalisation, EU enlargement • Congestion, optimisation of public investments, Road pricing, sustainable transport • Research project for the Danish Ministry of Transport and Energy The future flow of goods in the enlarged EU

4. Objective of the project • Prediction of bilateral freight flows between all European Countries • Method? The future flow of goods in the enlarged EU

5. Existing Freight Flows (tons/year) European Trade Flows (US $ / year) Gravity Model 1967 - 2002 Transport Forms and Route Choice( SENEX ) 2000 Conversion Growth Rates 2000 - 2025 US $  tons  Commodity Group. Scenario Analysis 2025 Transport Form and Route Choice( SENEX ) 2025 The principle The future flow of goods in the enlarged EU

6. Growth in trade vs. growth in tons The future flow of goods in the enlarged EU

7. Growth per commodity s.t. The future flow of goods in the enlarged EU

8. Data • Sample: EU15 + 2 EFTA countries : 16 countries • Period 1967-2002 • All economic variables are in constant prices (USD 1995) • Distance: great circle distance from capital to capital • Source: CHELEM, CEPII The future flow of goods in the enlarged EU

9. Growth in real GDP and trade 550 250 Source CHELEM database The future flow of goods in the enlarged EU

10. Econometric approaches • Error Component Model • Fixed Effects Model (FEM) • Three-way model with time and country effects (3-way) • Dynamic The future flow of goods in the enlarged EU

11. Econometric Approaches • Fixed Effects Model (FEM) Trade flow effect Time effect • 3-way model with time and country effects Mátyás (1997): Export country effect Import country effect Time effect The future flow of goods in the enlarged EU

12. Econometric approaches Static vs. dynamic • Problem: • Model with lagged value of the dependent variable is biased • Order of the bias for a FEM is 1/T Baltagi (1995) • Solution (Judson and Owen, 1999): • For T<30 years ; Use Generalized Method of Moment (GMM) instead of the Least Squares (LS) estimation to correct for the bias The future flow of goods in the enlarged EU

13. Results for EU15-EFTA countries The future flow of goods in the enlarged EU

14. Central and East European Countries (CEEC) • Problems: • Not relevant to estimate a model with the CEECin the period 1993-2002 • How to take the integration process into account? • Solutions: • Use the estimation based on the ”EUEFTA” sample • Keep the dynamic formulation • Estimate fixed effects for these countries The future flow of goods in the enlarged EU

15. Trade in 2025 Regional distribution of trade The future flow of goods in the enlarged EU

16. Changes in import and export (tons) The future flow of goods in the enlarged EU

17. Import by region and goods type (ton) The future flow of goods in the enlarged EU

18. Total increase in tons on the road network Total change on the road network(tons per year) The future flow of goods in the enlarged EU

19. Tons in transport to CEEC The future flow of goods in the enlarged EU

20. Conclusion • Method for forecasting future freight flows • From volume of trade to tons • Allocatethe growth per commodity group • Introduce the growth rates into the freight model • Results similar to TEN STAC (2003) • Show the changes in road network • Indications of future capacity problems The future flow of goods in the enlarged EU

21. Thank your for your attention Ole Kveiborgok@dtf.dk