dc.description.abstract | This study sought to examine the relationship between Kenya’s horizontal trade
diversification policy with the East African Community (EAC) and its impact on her
economic growth for the period 1995 to 2013.
The study used the random effects model on a balanced panel dataset to determine the
impact of the Herfindahl-Hirschman Index (HHI) on the growth of three dominant
EAC countries, i.e. Kenya, Tanzania and Uganda for a nineteen years period. The
HHI measures the dispersion of trade value across a country’s exports, and the index
itself is bounded between 0 and 1, with a higher index indicating that exports are
concentrated in fewer sectors, thus vulnerable to trade shocks and thereby reducing
economic growth rates, while a completely diversified product sector will be closer to 0.
The research confirmed that the arithmetic mean of Kenya’s GDP, which was the best in
the EAC region, was USD27.1 billion while the HHI averaged 0.73; and is significantly
influenced by Per-capita GDP and volume of manufacturing exports to total exports.
This index indicates a prolonged but declining worsening of Kenya’s trade diversification
policy, and posits the need for a structural transformation of her merchandise exports.
Overall, the results obtained were consistent with the findings of some trade economists,
such as Bebczuk and Berretoni (2006) and Noureen and Mahmood (2014), who opined
that the major determinants of HHI includes; Exports to GDP, Manufacturing exports to
total exports, Per Capita GDP, Gross Fixed Capital to GDP, Credit to Private Sector to
GDP, Net Foreign Direct Investment to GDP and the author’s recent inclusion of the
impact of the EAC Treaty on economic growth for the three dominant countries. | en_US |