Determinants of Primary Commodity Export in Sub-Saharan Africa (A Panel Study)
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Date
2007-08
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Addis Ababa University
Abstract
The paper examines the implication of demand and supply side factors on SSA primary
commodity export performance. A Sample of 21 countries is selected for the period 1995 to
2005, thus forming a panel data. The simultaneous equation disequilibrium version of
Goldstein and Khan (1978) model is used for the analysis. In addition to the usual price and
quantity variables, the model is augmented with policy actions of both exporting and
importing countries. This model is estimated using both difference generalized method of
moments (DGMM) and system generalized method of moments (SGMM). In addition, the
study tests whether the small country assumption holds true using Brownes’ (1982)
specification of the model.
Using the first model, we found that the policy choices and actions of the importing countries
are major constraints of the export sector. Although the supply side factors are found to be
weak, when compared with the demand side factors, income and road are found to be
significant in explaining the sectors performance. Taking the small country assumption into
consideration, all the domestic factors are significant in explaining the export performance. In
general, the results of the study indicate that the export sector is inelastic for both the external
and internal factors. So we can infer that, the export of primary commodity is constrained by
both the domestic and external factors. Consequently, there is a need to switch to other export
earning mechanism and/or to provide enough attention in alleviating the constraints.
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Primary Commodity Export in Sub-Saharan Africa