A sure thing a seemingly unrelated test of international trade models for New Zealand

Abstract

This dissertation empirically tests the extent to which three alternative trade theories explain the pattern of New Zealand's international trade. This is accomplished by nesting a gravity equation, the Heckscher-Ohlin model and Linder's overlapping demands hypothesis in an econometric model. The model is estimated separately for imports and exports over a system of 12 commodity groupings. Due to the similarity between the regressions over the 12 commodities, Zellner's (1962) Seemingly Unrelated Regression Equations (SURE) estimation method is employed. The results indicate that, the gravity model has the most explanatory power and shows only weak support for the Heckscher-Ohlin theorem and the overlapping demands hypothesis.