Learning by Exporting or Self Selection? Which Way for the Kenyan Manufacturing Firms?

Abstract

In this paper, firm level panel data for Kenyan manufacturing sector is usedto investigate whether exporters are different from non exporters and thecausal relationship between exporting and productivity. The paper uses aproduction function which is complemented by firm level characteristics andbusiness environment factors. The Generalized Least Squares (GLS)regression is used to estimate whether exporters are different from nonexporters while the causal relationship between exporting and productivity is determined using the concept of Granger causality test. The results obtained show some significant differences between exporters and non exporters. The results also show some evidence for learning-by-doing hypothesis and evidence for self-selection of more efficient firms into exporting. On the policy front the paper calls for more focus on improving exports in order for Kenya to industrialize.