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The gravity model and the test for the regional integration effect:the case of Tanzania

Author

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  • Alexander B. Darku

    (University of Lethbridge, Canada)

Abstract

This paper demonstrates that the appropriate econometric technique of testing for the effect of regional integration on bilateral trade is to augment the standard gravity model with country specific dummies instead of regional integration dummies. Using data on bilateral trade between Tanzania and her 23 trading partners over the period 1980–2004, the paper reports three important results. First, contrary to results from the traditional approach, estimates from the new econometric technique indicate that both the EU and the EAC have had moderate trade creation effects on Tanzania’s bilateral trade. Second, I find that Tanzania’s non-traditional trading partners such as Japan, India, Singapore, Hong Kong and the USA are relatively more opened to Tanzania’s exports. Third, the results also indicate that whereas it is difficult for Tanzania’s exports to penetrate foreign markets, foreign goods easily penetrate Tanzania’s market. The policy implication is that the government should continue with its efforts to strengthen the EAC, and to gain more exports market to the non-traditional trading partners, if the export growth development strategy is to become a reality in Tanzania.

Suggested Citation

  • Alexander B. Darku, 2009. "The gravity model and the test for the regional integration effect:the case of Tanzania," Journal of Developing Areas, Tennessee State University, College of Business, vol. 43(1), pages 25-44, September.
  • Handle: RePEc:jda:journl:vol.43:year:2009:issue1:pp:25-44
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    Citations

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    Cited by:

    1. Chengang Wang & Yingqi Wei & Xiaming Liu, 2010. "Determinants of Bilateral Trade Flows in OECD Countries: Evidence from Gravity Panel Data Models," The World Economy, Wiley Blackwell, vol. 33(7), pages 894-915, July.
    2. Norehan Abdullah & Hussin Abdullah & Hadi M. Othman Abuhriba, 2014. "The Determinants of Trade and Trade Direction of Arab Maghreb Union (AMU)," Journal of Empirical Economics, Research Academy of Social Sciences, vol. 2(2), pages 46-62.
    3. Steven Buigut, 2016. "Trade Effects of the East African Community Customs Union: Hype Versus Reality," South African Journal of Economics, Economic Society of South Africa, vol. 84(3), pages 422-439, September.
    4. Alfred Moyo, 2019. "Evaluating the impact of global oil prices on the SADC and the potential for increased trade in biofuels and natural gas within the region," WIDER Working Paper Series wp-2019-36, World Institute for Development Economic Research (UNU-WIDER).
    5. Kaitibie Simeon & Haq Munshi Masudul & Rakotoarisoa Manitra A., 2017. "Analysis of Food Imports in a Highly Import Dependent Economy," Review of Middle East Economics and Finance, De Gruyter, vol. 13(2), pages 1-12, August.
    6. Francis Onditi, 2021. "What does the Data Tell Us About Dominatarian Theory of Regional Integration?," Jadavpur Journal of International Relations, , vol. 25(1), pages 73-100, June.
    7. Barnes, Ryan & Bosworth, Ryan, 2015. "LNG is linking regional natural gas markets: Evidence from the gravity model," Energy Economics, Elsevier, vol. 47(C), pages 11-17.
    8. Sultan, Maryam & Munir, Kashif, 2015. "Export, Import and Total Trade Potential of Pakistan: A Gravity Model Approach," MPRA Paper 66621, University Library of Munich, Germany.

    More about this item

    Keywords

    Economic Integration; Gravity Model; Trade Liberalization; Bilateral Trade; Tanzania;
    All these keywords.

    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F15 - International Economics - - Trade - - - Economic Integration

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