Determinants of international trade: A simultaneous equation model

Abstract

This paper examines the determinants of inter‐industry differences in international trade in a simultaneous equation model. The model was estimated on 132 (3‐digit SITC) Australian manufacturing industries. The results demonstrate the importance of choosing an appropriate statistical methodology in testing trade theories. The simultaneity bias was seen in a number of cases. The results show that tariff and non‐tariff barriers, transport costs and multinational activities are more important than factor intensities in explaining inter‐industry differences in Australian trade in manufacturing.

Notes

Department of Economics, University of Auckland.