EconStor: A Gravity Model of Barriers to Trade in New Zealand
A Gravity Model of Barriers to Trade in New Zealand
There are many costs associated with international trade. These costs act as barriers to trade and affect the level of trade. This paper first provides a brief discussion of the state-of- the-art methods used to measure trade costs and to quantify their impact on trade. It then empirically investigates the role of a range of barriers to New Zealand's trade within the framework of a gravity model of trade. The analysis covers New Zealand's trade with around 200 trade partners over the years 2001 to 2006, and includes tariffs and a number of non-trade policy factors such as property rights, financial market sophistication, corruption, and a range of measures related to infrastructure quality. The empirical evidence both in the literature and in this study highlights the growing importance of nonpolicy induced barriers to trade.