Institutions and Export Performance: Firm Level Evidence from Kenya

Abstract

This study sought to examine how institutions shape export performance using Kenyan data. The left-censored random-effects Tobit and the random-effects Generalized Least Squares (GLS) estimators were applied on panel data obtained from World Bank’s Enterprise Surveys covering 2007, 2013, and 2018. Using a vector of institutional variables touching on the efficiency of the court system, access to trade finance, tax inspections, bribes during tax inspections, on-the-job trainings, customs regulations, quality certifications, informal competition, operating licenses, and trade permits, the results indicate that specific institutions on quality certification, trade finance, and on-the-job trainings are associated with improvement in export performance while bureaucratic tax inspections dampen prospects from export trade. The findings are robust as the coefficients from the Tobit estimator are reinforced by those from the GLS estimator. These findings constitute an original attempt to examine the interlink between institutions and export performance with specific focus on the Kenyan context. Pertaining the trade environment, the findings point towards a need to enhance institutional capacity, undertake reforms of export-related institutions, invest towards a national quality infrastructure, and entrench self-regulation not only in Kenya, but also among other developing countries.