The Impact of export incentives on its contribution to manufacturing export growth in Ethiopia

Abstract

Export incentives have played a catalytic role in encouraging exports in poor countries. However, it is important to recognize the impact of export incentives on manufacturing export growth. The study has examined the effect of manufacturing export incentives on Ethiopian manufacturing export performance. The study aims to shed light on whether there is an impact and to what degree the government's incentives have contributed to the country's manufacturing export value by using time-series quarterly data on manufacturing export incentives, world GDP growth rate, and real effective exchange rates from 2005 quarter 1 to 2019 quarter 4. Three phases of research were carried out, including a review of the trends in the scheme of export incentives and growth of manufacturing exports, a review of the correlation between variables, and subsequently, quarterly time series econometric analysis conducted among the manufacturing export value against the independent variables. The study results showed that Ethiopian manufacturing export growth increased after the implementation of export tax incentives, but manufacturing exports share to the total export is still minimal. This study concluded that export incentives have a positive role in improving manufacturing export growth. It has also been noted that the effect of world GDP growth rate and real effective exchange rate on manufacturing exports are limited to the long run only.