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Institutions and export performance: firm level evidence from Kenya

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Abstract

This study sought to examine how institutions shape export performance using Kenyan data. The left-censored random-effects Tobit and the random-effects Generalized Least Squares (GLS) estimators were applied on panel data obtained from World Bank’s Enterprise Surveys covering 2007, 2013, and 2018. Using a vector of institutional variables touching on the efficiency of the court system, access to trade finance, tax inspections, bribes during tax inspections, on-the-job trainings, customs regulations, quality certifications, informal competition, operating licenses, and trade permits, the results indicate that specific institutions on quality certification, trade finance, and on-the-job trainings are associated with improvement in export performance while bureaucratic tax inspections dampen prospects from export trade. The findings are robust as the coefficients from the Tobit estimator are reinforced by those from the GLS estimator. These findings constitute an original attempt to examine the interlink between institutions and export performance with specific focus on the Kenyan context. Pertaining the trade environment, the findings point towards a need to enhance institutional capacity, undertake reforms of export-related institutions, invest towards a national quality infrastructure, and entrench self-regulation not only in Kenya, but also among other developing countries.

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Notes

  1. Henceforth we refer to institutional and regulatory framework as just institutions or institutional framework.

  2. They support an environment that induces increased trade exchanges.

  3. In this paper, the firm is the unit of analysis. Firms are assumed to be rational economic agents.

  4. Firms make supernormal profits.

  5. In this case, firms make normal profits.

  6. Because we are using panel dataset, the fixed effects model is inappropriate when using the censored Tobit regression as it would not accommodate variables that are constant over the various data waves. An example of a variable that is constant over time in panel datasets is gender of the owner of a firm. To accommodate for variables that are constant over the panel waves, the censored Tobit estimates the random effects model only.

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  1. Trade and Foreign Policy , Kenya Institute for Public Policy Research and Analysis (KIPPRA), Nairobi, Kenya

    Shadrack Muthami Mwatu

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Mwatu, S.M. Institutions and export performance: firm level evidence from Kenya. Int Rev Econ 69, 487–506 (2022). https://doi.org/10.1007/s12232-022-00401-8

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