DETERMINANTS OF ETHIOPIA’S LIVE ANIMAL EXPORT: A GRAVITY MODEL APPROACH

Abstract

The purpose of this study is to analyze factors that determine export flows between Ethiopia and its trading partners using a gravity model approach. The research had used secondary data collected from different sources and covers periods from 2000 - 2017 for top 15 trade partners of Ethiopia, which implies that the data were panel. There was consideration of the importing capacity of the countries and successiveness of their importing condition for considering the countries as a sample. Different tests were applied in order to select the appropriate model to regress the gravity model. As of those tests, the research had adopted the random effects gravity model. The model result showed that 10 of the total variables four are significant at different level of significance. Partner country’s Gross domestic Product, weighted distance between Ethiopia and partner countries’, partners country’s population and total road network of Ethiopia found to be a significant factors affecting Ethiopia’s live animal export in the period between 2000 and 2017. While Partner country’s Gross domestic Product, partner country total road network and partners country’s population have significant and positive impact on live animal export of Ethiopia, the weighted distance between Ethiopia has significant but negative impact on the trade. On the other hand, bilateral real effective exchange rate between birr and partner’s currency, foreign direct investment and Ethiopia’s sharing of common border with partner country ,preferential trade and regional trade agreement(RTA) are found to be insignificant in affecting Ethiopia’s live animal export in the indicated period. Ethiopian gross domestic product and Ethiopian population has been dropped because of the existence of milticollinierity problem.