A note on interregional trade in New Zealand

This paper attempts to test the hypothesis that given the presence of economies of scale which enable regions with larger firms to export more to regions with smaller firms, it is possible to rank a regions's exports according to the extent to which the scale of their production exceeds the national average. Data are utilized covering New Zealand's highly protected manufacturing sector. A rank correlation, significant at the 5 per cent level of probability, emerges between x_i and s_i in twelve of the thirteen regions considered; x_i being per capita value added in the i‐th industry divided by per capita value added in the nation for the i‐th industry and s_i being the average size of firm in the i‐th industry divided by the average size of firm in the nation for the i‐th industry. Such a result suggests that Heckscher‐Ohlin theorizing is of limited use in explaining regional trade flows.