An Assessment of Factors Determining Intra-Industry Trade Between Ethiopia and Sub-Saharan Africa Countries (2000-2016)

Abstract: This paper examines the intensity of Intra-Industry Trade (IIT) in miscellaneous manufacturing products with digit-two code level. It also aims to identify the determinants of IIT between Ethiopia and the twenty-two Sub-Saharan African countries using random effects estimation for the period 2000-2016. On the basis of the Grubel-Lloyd index, the study finds out that more than half of the SSA trading partners level of IIT is below 0.5 that indicates low intensity of IIT. The econometric result reveals that the extent of Ethiopia’s IIT is positively correlated with the market size, while it is negatively correlated with trade openness, distance, common language. and COMESA dummy. The negative sign of trade openness, common language and COMESA dummy are inconsistent with theoretical expectations. The coefficient of COMESA dummy is also unexpectedly insignificant; this can mainly be associated with Ethiopia’s unwillingness to be a member of COMESA FTA. Key words: Ethiopia, SSA, country-specific determinants, IIT, miscellaneous manufacturing products