Determinants of Trade Patterns and Comparative Advantage of Tanzania Trade 1981-2009

Abstract

This study analyses the determinants of Tanzania’s trade and comparative advantage. The results show that most of the commodities with comparative advantage (CA), expressed in terms of symmetric Revealed Comparative Advantage (SRCA), are the agricultural products. In addition, the empirical trade analysis (ETA) reveals that the commodities with CA are primary intensive, resource intensive, and unskilled labor intensive commodities. The gravity model demonstrates that, the economic size of the partners’ country (GDPj), and per capita income together with the Tanzania’s per capita income, regional integration dummy, and exchange rates determines Tanzania’s trade flows in all levels, when total trade, export, export of agricultural products and export of manufactured products volume of trade are considered. However, Tanzania’s economic size as well as the cost of trading growth, expressed as distance, impedes the trade flows.

Keywords: Gravity model, Comparative Advantage; factor intensity; export oriented economy; Regional Trade Agreements; production’s specialization and competitiveness