Discussion Paper No. 256 of 2021 on Assessing the Effect of Kenya’s Institutional Framework on Export Trade

Abstract

This study sought to assess the effect of Kenya’s institutional framework in promoting export trade as a channel for long-term growth and economic development as enshrined in the Kenya Vision 2030. Panel data obtained from World Bank’s Enterprise Surveys spanning 2007, 2013, and 2018 was applied to the censored Tobit estimator. Institutional framework was measured using efficiency of the court system, access to trade finance, frequency of tax inspections, bribes during tax inspections, access to formal training programmes for permanent and full-time employees, rigidity of customs and trade regulations, internationally recognized quality certifications, informal competition, operating licenses, and business licensing and permits. Gender of the owner of the firm, managerial experience, and firm size were used as controls. Tax inspections were associated with a shrinkage in the country’s fortunes from export trade. In contrast, access to trade finance, on-the-job training of employees, internationally recognized quality certifications, and firm size were associated with growth in export trade. The findings point towards a need to enhance institutional capacity, undertake regulatory reforms in the export trade sector, invest towards a national quality infrastructure, and enhance selfregulation for export trade promotion.