"Industrialisation of New Zealand and Trade with Australia": a Theoretical and Quantitative Analysis

Abstract

The thesis consists of eleven self-contained articles and one chapter of Introduction and Summary which shows logical connection between those individual articles. The basis of the thesis is my present stand-point that the standard welfare economic analysis of customs unions stressing the gains from trade creation against the loss from trade diversion does not explain why gains are not exploitable through the world market, but can be obtained by customs unions. In usual political discussion, however, stress is laid on the gains to domestic industry from economies of scale and increased competition in a larger market. The latter discussion involves a preference for industrial production and is concerned more with the potentialities of customs unions for increasing the industrial output of the country and the efficiency of its industrial production. The present thesis may be thought to be along this line of reasoning. Throughout this thesis, an effort has been made to relate quantifiable economic variables to economic theory and where possible to provide economic models in which all economic variables considered are forced to be consistent with each other. The thesis may be characterized by the extensive use of various sources of data and application of economic theory in various fields. Chapter 1 presents an empirical evidence which explains the need for industrialization of New Zealand. The results of regression analysis presents international comparison of export performances and then combined with a theory on a country's trade balance in a dynamic setting. Chapter 2 attempts to sketch quantitatively the pattern of industrial growth in relation to international trade; then, causes of industrial growth will be quantitatively investigated. Chapter 3 contains a mathematical economic model dealing with a resource allocation problem of a country seeking industrialization. Attention will be concentrated on productivity study of manufacturing industries in Chapters 4, 5 and 6. An empirical and theoretical investigation of Marshallian externalities in Chapter 5 is of importance in explaining the gains from trade between similar countries which will be dealt with in a study of customs unions theory in Chapter 11. We seek for the theoretical reasons for the trade between Australia and New Zealand and attempt to verify empirically Hecksher-Ohlin theory in Chapters 8 and 9. In Chapter 10 the effects of establishment of New Zealand – Australia Free Trade Agreement will be quantitatively analysed with constant-share – analysis of export growth. Finally, Chapter 11 demonstrates my theoretical stand-point on the issues of customs unions.