Determinant of Sesame Export Performance in Ethiopia: A Panel Gravity Model Application

Abstract

Ethiopia’s sesame export earn percentage share in the total export had been rapid declining over the last decades while it was the second commodity in currency grossing of the country. The objective of this study was to examine the determinant factors of Ethiopia’s sesame exports performance, in the aspect of export trade, by the use of a more realistic model approach, a panel gravity model. It used short panel data that cover 11 countries of consistent Ethiopia’s sesame importers for the period of 13 years from 2002 to 2014. The panel unit root test of Levin-Lin-Chu was used for each variable and applied the first difference transformation for the variables that had a unit root. The random effect model results suggested that real gross domestic product of importing countries; Ethiopian real gross domestic product, real exchange rate and weighted distance were found to be the determinant factors of Ethiopia’s sesame exports performance. The estimated results revealed that as real gross domestic product of importing countries increase by 1%, the flows of Ethiopia’s sesame exports performance increase by 1.63%. Based on the finding results, the researcher recommends that the policy maker must adopt the policies that reduce the cost of shipping through improving the infrastructure for shipments sector and contract a free trade agreement with distant countries. The government should encourage the private sector to diversify their products and improving the quality of its products to increase the competitiveness the Ethiopian products in foreign markets.

Keywords

• sesame exports
• ethiopia
• gravity model
• fixed effect model
• random effect model