Are Trade Preferences a Panacea?: The African Growth and Opportunity Act and African Exports

Abstract

The Policy Research Working Paper Series disseminates the findings of work in progress to encourage the exchange of ideas about development issues. An objective of the series is to get the findings out quickly, even if the presentations are less than fully polished. The papers carry the names of the authors and should be cited accordingly. The findings, interpretations, and conclusions expressed in this paper are entirely those of the authors. They do not necessarily represent the views of the International Bank for Reconstruction and Development/World Bank and its affiliated organizations, or those of the Executive Directors of the World Bank or the governments they represent.

Explaining Export Duration in Kenya

“…Since the three variables are related to AGOA, becomes the DiD estimator. This approach was recommended by Frazer and Van Biesebroeck () and has been applied by studies such as Edwards and Lawrence () and Fernandes et al ().…”

“…More so, widely used trade databases such as UNComtrade and WITS lack bilateral export records for Kenya for a number of years. For instance, 2011, 2012 and 2013 (Fernandes et al, ). Trade flow data are used to compute the failure dummy depending on whether a year had positive trade flows or not.…”

“…Chacha and Edwards () use a panel logit with random and fixed effect and affirm that COMESA's effect is positive but insignificant. However, Chacha and Edwards () do not consider EAC and both studies (Kinuthia, ; Chacha and Edwards, ) ignore non‐reciprocal trade agreements yet some studies (Condon and Stern, ; Fernandes et al, ) show that AGOA has enhanced textile and apparel exports from Kenya.…”

“…Non‐reciprocal trade agreements such as AGOA tend to be endogenous due to selection bias (eligible countries have to meet certain conditions) and unobserved heterogeneity. As a remedy, studies such as Frazer and Van Biesebroeck (), Edwards and Lawrence (), and Fernandes et al () have applied the triple difference‐in‐differences (DiD) approach to study the effect of AGOA on African exports. We apply this approach on export survival, which to our knowledge has not been done before.…”

Revisiting the Trade Impact of the African Growth and Opportunity Act: A Synthetic Control Approach

“…Though studies that employ triple difference-in-difference (DD) (Frazer and Van Biesebroeck, 2010;Fernandes et al, 2019) to evaluate the impact of PTAs provide a much better estimate in better understanding impact across product groups, they still suffer from the basic assumption that underlies the approach. That is, DD estimators provide unbiased treatment effect estimates only if, in the absence of treatment, the average outcome for the treated and control groups follow parallel trends.…”