Determinants of Ethiopian Flower Export Performance: The Case of Gravity Model Application

Abstract

In contemporary economic activities, international trade is evolved from perfect protection to perfect free global trade among countries to bring balanced. International trade in general and export in particular is the most important economic activities to secure economic growth and development. However, sub-Saharan African countries including Ethiopia exports agricultural products balky in volume low in value leads to low performance and also low in diversity. To improve Ethiopian export performance, the government has been taking different policy options among them is export diversification. Flower commodity export is one of the diversification policy options. Each commodity export has its own constraints and opportunities affecting its export performance. The objective of this paper was to identify factors affecting flower export performance in the Ethiopian economy using five years balanced panel data ranging between 2010 and 2014 to Ethiopian flower importing countries. The result of the statistical analysis indicated that even though there is variation among years, the average five years export performance was about $ 4.79 million from exporting about 96.48 tons of flowers. The result of the gravity model econometric regression results revealed that domestic gross product (GDP) and the domestic population growth had positive effects while the exchange rate had a negative effect on the Ethiopian export performance dynamics. The result, it is suggests that all the factors affecting Ethiopian flower export performance are domestic factors or supply side factors. Therefore, the export economic policy should focus on boosting the GDP, efficient and effectiveness of human power through education and training, and stabilizing the exchange rate to enhance the Ethiopian flower export performance in particular and national export performance in general.