Econometric Estimation of Export Determinants Using a Gravity Model: A Case of the East African Community (EAC)

Thisstudy aimsto estimate the factorsthat affect the exports of the EastAfrican Community (EAC) members. Design/Methodology/Approach - We employ a gravity model to analyze the determinants of export in the EAC. Twenty-eight countries are sampled for the study based on Kenya’s top 30 major exporting destinations in 2018. The estimation uses panel data covering a period of 18 yearsfrom 2001 to 2018. We apply the Pseudo Poisson Maximum Likelihood (PPML) estimator which is highly reliable and gives consistent and robust results even in the presence of heteroskedasticity. Findings - The coefficients of all explanatory variables are statistically significant. Most of the variables such aslanguage, bilateral distance, and landlockednessshow the expected signs. Having the same official language promotes trade between countries while landlockedness and distance negatively affect export trade flows. The percentage of people using the internet exhibit negative and positive influences on exports depending on individual-specific and time-specific fixed effects. Research Implications - In addition to the typical gravity model variables such as GDP, population, language, distance and landlockedness this paper mainly attempts to examine the effect of the interconnectedness of the EAC on export trade flows measured by percentage of a population who use the internet. The findings of the paper show some policy implications with respect to investment in infrastructure and forming economic integration