Evaluating Ethiopia's Agricultural Export Potential: Empirical Evidence Using Gravity Model

Abstract

Given Ethiopia's export revenue is mainly from agricultural primary products, this study attempted to estimate the major determinants of Ethiopia's agricultural export over the study period (1995-2015) using a dynamic gravity model. The empirical results are in favor of the model as it is likely to produce consistent results where the lagged agricultural export has a positive and signicant eect on current agricultural export ows. Home country's population and trade openness are found to have a positive im- pact on agricultural export while importing country's population, distance and home country's contract-intensive money variables are found to be signicant in aecting Ethiopia's agricultural export negatively. Furthermore, European countries including Israel, Switzerland, Greece, Norway, Finland, Sweden, Romania and Austria remained to be the dominant future potential destinations. Thus, export promotion towards these economies must be prioritized through bilateral trade agreement arrangements and re- duction in public sector bottlenecks to exporters.

Keywords: Ethiopia; Dynamic Gravity Model; Agricultural Export Potential; System GMM Estimator.

DOI: 10.7176/JESD/11-21-01

Publication date: November 30^th 2020