The East African Community - An Export Diversification Opportunity?

Abstract: This paper aims to answer the question whether the formation of the customs union within the East African Community (EAC) has led to a higher export diversification among its member states. Export diversification can reduce a country’s vulnerability to price movements of exported goods and thus lead to a more stable economy. An evaluation of strategies aiming at generating a higher export diversification is therefore of interest and this paper focus on regional integration as such a strategy. To determine whether the EAC has led to a higher export diversification among its member states a fixed effect regression analysis has been carried out with the Herfindahl-Hirschman Index posing as a measurement of export diversification. The data consists of 40 different exporter-importer country pairs over the period 1995-2015. The study finds no support for the hypothesis that the EAC has led to an increased export diversification among its member states.