本文基于面板数据进行合并普通最小二乘、随机效应和固定效应估计。由于Hausman检验拒绝了零假设（随机效应有效），因此固定效应模型结果被认为是可靠的，并基于固定模型结果。调查结果显示，从肯尼亚到世界15个主要国家的茶叶出口流量是由贸易伙伴的GDP、进口伙伴的人口、实际汇率、贸易伙伴在世贸组织和东南非共同市场的成员资格、以及，从肯尼亚到进口国的距离，如果进口国与肯尼亚共享同一殖民地，最后如果进口伙伴不是内陆国。
CHAPTER 1 INTRODUCTION
1.1 Background of the Study
Exports are defined as economic and commercial activities regarded as being of great importance for nations' economic growth and sustainability (Houghton & Sheehan, 2000). In particular, this is a crucial means of acquiring foreign currencies, which are the means of economic and financial intervention in external markets from a country. Exports are crucial to growth, and an essential part of the economic growth process is expanding exports. Commercial policy promotion at the national and international level has attracted considerable devotion (Orindi, 2010). Many countries worldwide focus on promoting their products _ exports mainly because of the shrinking local markets. The country's export sector is vital because it is a source of growth that can be attributed to the foreign exchange earned (McCombie & Thirlwall, 2016). This is evident in Kenya's tea sector, which has been significant in foreign exchange generation and employment creation over the past decade.
The changing international and regional trade arrangement has greatly influenced Kenya's external environment. For instance, the multilateral trading arrangements under the World Trade Organization (WTO) and the regional trading arrangement such as Common Market for Eastern and Southern Africa (COMESA), the East African Cooperation (EAC), and the European Union (EU) have contributed significantly to Kenya's export demand. Again, with advances in economic integration, notably the EAC and COMESA in conjunction with the African Growth Opportunity Act (AGOA), potential export opportunities can be explored to the advantage of Kenya, which explains the shifting export and expansion markets of Kenya to other African countries and the decline in exports to the EU (Were et al., 2002). South-South trade is growing substantially and is an essential opportunity for developing countries to increase their exports (Fugazza & Vanzetti, 2008). Within East Africa, Kenya still maintains an exporting edge over the rest of the East African countries; currently, Kenya is exporting 41% of total export goods.
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1.2 Statement of the Problem
Trade has increasingly become an underpinning determinant of most countries in the world's economic prosperity, and Kenya is no exception to this. Traditional trade theories are mainly concerned with identifying what goods a country trades while ignoring the trade volumes. Understanding the factors determining bilateral trade volumes of a country or a region widens the horizons of a country or region’s trade policies. The gravity flow model helps to understand the factors determining a country’s bilateral trade volumes from a practical or empirical perspective. It broadens the horizons of a country’s trade policies (De Benedictis & Vicarelli, 2005; Deardorff, 1998; Eichengreen & Irwin, 1995). Various gravity analyses are performed to evaluate various tradepolicy issues, such as the effects of openness of an economy or protectionist policies and the merits of proposed regional trade arrangements (such as COMESA and East African Community in the case of Kenya) and the effects of national borders. Successfully identifying the bilateral trade flows can suggest a desirable free-trading partner and conjecture the volume of a missing trade or unrealized bilateral trade flows. In the case of Uganda, a trade gravity model is a powerful tool for explaining the bilateral trade flows and volumes.
In Kenya, the gravity model has been employed by Orindi (2010) to investigate the determinants of Kenyan exports; Irandu (2019) used the gravity model to analyze factors influencing the horticultural exports in Kenya, while Yego (2015)analyzed Kenyan livestock exports using a gravity model. Empirical work has shown that most studies focus on determinants of total agricultural exports or other agricultural commodities. Therefore there is a knowledge gap on tea exports and since it’s Kenya’s primary export. A deeper understanding of Kenya’s tea trade flows would provide an additional practical framework for making informed trade policy decisions to improve the country’s trade regime. For transitional countries like Kenya, UNCTAD (1999) notes that the gravity flow model is very relevant while making informed policy decisions, especially when modeling potential trade flows and examining changes among international trading partners of transitional economies.
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CHAPTER 2 LITERATURE REVIEW
2.1 Gravity model
The classical and new trade theory can successfully explain why countries should join world trade; however, they cannot answer the size of trade flows. It has been known since the seminal work of (Tinbergen, 1962) that a law called the "gravity equation" can approximate the size of bilateral trade flows between any two countries. The model is based on Newton's universal law of physical gravity, which states that the gravitational attraction of two objects is proportional to their masses and reverse to their distance squared. Much like planets are attracted by their size and proximity to each other, the country's trade by their GDP and proximity (Andriamananjara et al., 2010).
Evenett and Keller (1998) discuss three types of trade models in analyzing the theoretical foundations of gravity equations. In the way that specialization is obtained in equilibrium, these models differ. They are:
(1) Technology differences in the Ricardian model across countries,
(2) Variations in the different factor endowments of countries in the H - O model
(3) New trade theory
These are the perfect specialization models, and for a model of imperfect specialization, they are considered limiting cases, but it is essential to have empirically imperfect product specialization. In real life, different countries' technologies and factor endowments are different; they change over time and can be transferred between countries. Trade theories explain why countries trade in various products but don't explain why some countries ' trade links are stronger than others and why countries ' trade levels tend to increase or decrease over time. This is how trade theories are limited in explaining trade flows; the gravity model is successful in this context, although the trade theories cannot explain the extent of trade. It enables the explanation of the extent of trade as an aspect of international trade flows to be taken into account (Paas, 2000). Unlike classical supply-side models like the Ricardian model (which relies on differences in technology across countries to explain trade patterns) and the Heckscher-Ohlin (HO) model (which relies on differences in factor endowments among countries as the basis for trade), the gravity model of trade takes both supply and demand into account (geographical distance, trade policies, uncertainty, and various bottleneck) in describing bilateral trade flows between countries, trade preference variables (preferential trade arrangements, monetary unions, political blocs, shared language, shared borders, and cultural differences) are used (Bacchetta & Van Wincoop, 2004).
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2.2 Theoretical foundation of the gravity model
where Tij is the trade flow between countries i and j, C is a constant, Mi is the mass of the country of origin i (in bilateral trade flows, it is common to use the GDP of each country), Mj is the mass of the country of destination j, dij is the distance between the countries i and j; β1 is the potential to generate flows, β2 is the potential to attract flows and β3 represents impediments to trade due to the distance costs.
There is a long history of the gravity model. Many authors notice the relation between flows, weight, and distance from the different locations. An early, compelling expression of the gravitational narrative is Ravenstein (1885) that explains how "currents" of migration are driven by "absorption of trade and industry centers" and "grow less in proportion.” Based on these theories and motivated by a desire to incorporate multilateral trade and distance into the common toolkit of the trade economist Isard and Peck (1954), empirically demonstrates the negative impact of distance on various modes of domestic and international transportation.
Isard (1954) comes to formulating a gravitational equation, but he has employed something different from Newton’s physics metaphor (electric potential instead of gravity). Yet, in emphasizing the importance of measures issues, the composition of trade, cultural factors, and politics to empirical research into the determinants of bilateral trading flows, Isard (1975) has already looked at many of the challenges that researchers are engaging with today's gravity model. While the gravity story has so many fathers, a group of Dutch economists led by Tinbergen published a gravity model and an empirical application also; they were responsible for the first formulation and application of the gravity model (Tinbergen, 1962). These early contributions started in the early 1960s with the first wave of applications (Leamer & Stern, 1970). While the model itself can be applied to many phenomena, most applications involved bilateral trade flows to focus on agricultural trade in my discussion.
Figure 3-1 Kenyan Agriculture exports 2017
CHAPTER3 PERFORMANCE OF KENYAN EXPORTS ......................... 14
3.1 The Export Trend ............................... 14
3.2 Major agricultural exports in Kenya. ................................... 15
CHAPTER 4 RESEARCH METHODOLOGY ................................ 20
4.1 Study area............................... 20
4.2 Model specification and theoretical framework .............................. 21
CHAPTER 5 RESULTS AND DISCUSSION .................................... 29
5.1 Trend of Kenyan tea exports .............................................. 29
5.2 Factors determining Kenyan tea exports to her partners ........................... 32
CHAPTER 5 RESULTS AND DISCUSSION
5.1 Trend of Kenyan tea exports
Over the past two decades, Kenyan tea exports to the world have been increasing mainly due to the steady growth of the plantation area and production, mostly by smallholders. As shown in figure 5.1, the specific annual exportation has been with an increasing trend whereby highest sales were recorded in 2017 with over 1.4billion.
Figure 5-1 Trend of Kenyan tea exports to the world
As depicted in figure 5.2, and table from the year 1990 South Asia region has been the main importer of Kenyan tea with importing average value of 4.9 billion USD and a value of more than 1.9 billion tons of tea that is 32% of the tea exported from Kenya to the world followed by the Middle East and North Africa which recorded 29 %. Among all regions, the Caribbean and Central America were the regions that Kenya exported tea average weight of 800,000 tones with a value of 1.4million USD dollars summing to 0.01% of the total exports per region.........................
CHAPTER 6 CONCLUSION AND RECOMMENDATIONS
6.1 Conclusion
The study aimed at determining factors affecting Kenyan Tea to her major trading partners. The gravity model was applied using the 1990-2017 panel data to identify these factors influencing Kenyan tea exports to its 15 major importers. Descriptive statistics including means and standard deviations were computed using R software. The descriptive statistics were used to examine the socio-economic characteristics of Kenya and its various trade partners. Results showed that Kenya’s average total bilateral trade was US$ 31million while her average GDP was valued at 27 billion US Dollars. The average real GDP of the trading partners was US$ 27 trillion; the mean population was at 30 and 90 million people for Kenya and her trading partners respectively. The average distance between Nairobi and any other capital city of the trading partners was 5216km.
The pooled ordinary least square, random effect, and fixed effect estimations were made based on panel data. Since the null hypothesis was rejected (random effects were efficient) by the Hausman test, the fixed effect model result was considered reliable and based on the fixed model results. The findings revealed that the tea export flows from Kenya to majors 15 countries of the world are driven by the GDP of trading partner, the population of the importing partner, real exchange rates, membership of trading partner in WTO and COMESA, distance from Kenya to the importing country if the importing country shares the common colony with Kenya and lastly if the importing partner is not a landlocked country.
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