Trade agreements and survival of service exports from Kenya

Figures & data

Figure 1. Growth of services, goods, and total (goods and services) exports in Kenya, 1975–2019.

Source: Authors’ computation using World Development Indicators (2021) data

Figure 2. Kenya’s service exports (1995–2019).

Source: Authors’ computation

Table 1. Survival dynamics by total and categories of services in Kenya

Service	Survival rate (year)				Duration (years)		No. of Obs.	No. of spells
	1^st	10^th	15^th	25^th	Mean	Median
Total	86%	70%	68%	61%	16	19	33,974	2167
Computer and information	74%	52%	50%	47%	9	7	3,230	348
Construction	75%	40%	35%	10%	9	5	2,566	283
Financial	93%	76%	75%	63%	18	25	3,929	223
Government	95%	90%	89%	85%	21	25	4,241	199
Insurance	89%	71%	69%	63%	16	18	3,914	252
Other Business Services	99%	98%	97%	97%	24	25	4,315	180
Personal, cultural, and recreational	78%	55%	55%	52%	12	8	3,256	280
Transportation	96%	90%	89%	89%	22	25	4,273	196
Travel	93%	85%	85%	84%	21	25	4,250	206

Source: Authors’ computation

Figure 3. Export survival by GATS.

Source: Authors’ computation

Figure 4. Export survival by geographical region.

Source: Authors’ computation

Table 2. Estimation results of the discrete-time hazard models with random effects

Variables	Clog-log	Probit	Logit
GDP Kenya	−1.4063***	−0.5430**	−1.3633***
	(0.407)	(0.226)	(0.469)
GDP importer	−0.1926***	−0.0931***	−0.2008***
	(0.050)	(0.025)	(0.054)
Distance	0.5492**	0.2978**	0.5975**
	(0.244)	(0.118)	(0.258)
Time Zone Differences	−0.0100	−0.0117	−0.0155
	(0.046)	(0.022)	(0.048)
Goods	−0.0622**	−0.0312**	−0.0692**
	(0.030)	(0.015)	(0.032)
Common language	0.2325	0.1088	0.2422
	(0.182)	(0.087)	(0.192)
Colonial relationship	0.1271	0.0660	0.1537
	(0.179)	(0.086)	(0.189)
Financial development	−0.1355***	−0.0588**	−0.1356**
	(0.052)	(0.025)	(0.055)
Exchange rate	0.0666***	0.0357***	0.0755***
	(0.024)	(0.012)	(0.026)
GATS	0.3574	0.2098*	0.4332
	(0.258)	(0.127)	(0.275)
Initial export value	−0.2305***	−0.1157***	−0.2516***
	(0.036)	(0.018)	(0.039)
Lagged duration	−0.1077***	−0.0566***	−0.1265***
	(0.028)	(0.015)	(0.032)
Total export value	−0.5235***	−0.2371***	−0.5431***
	(0.038)	(0.019)	(0.040)
Rho	0.3530***	0.2055***	0.1180**
	(0.067)	(0.058)	(0.051)
Year dummies	Yes	Yes	Yes
Spell no. Dummies	Yes	Yes	Yes
Duration dummies	Yes	Yes	Yes
Observations	22,557	22,557	22,557
Log likelihood	−1497	−1479	−1488

Note: The table reports estimated coefficients and the corresponding robust standard errors clustered at the importer-product level. *, **, and *** indicate statistical significance at the 10%, 5%, and 1% level, respectively. The dependent variable is a binary variable that equals one if an export spell is ended and zero otherwise.

Source: Author’s computation

Table 3. Probit regression marginal effects results by service

	(1)	(2)	(3)	(4)	(5)
	Total	Travel	Transport	ICT	Construction
GDP Kenya	−0.0180**	0.0105	0.1989**	−0.0478*	0.1441***
	(0.007)	(0.085)	(0.093)	(0.024)	(0.029)
GDP importer	−0.0031***	−0.0082	0.0177*	−0.0068	−0.0272***
	(0.001)	(0.010)	(0.009)	(0.006)	(0.009)
Distance	0.0104***	0.1452	0.0779	0.0411	0.0268
	(0.004)	(0.106)	(0.088)	(0.027)	(0.033)
Time Zone Differences	−0.0005	−0.0132	−0.0143	−0.0050	−0.0014
	(0.001)	(0.014)	(0.014)	(0.005)	(0.007)
Goods	−0.0010**	0.0168**	0.0069	−0.0036	−0.0080*
	(0.001)	(0.008)	(0.005)	(0.003)	(0.004)
Common language	0.0036	−0.0511	0.0418	−0.0347	0.0422
	(0.003)	(0.043)	(0.041)	(0.022)	(0.027)
Colonial relationship	0.0023	0.0450	0.0117	0.0269	−0.0499*
	(0.003)	(0.032)	(0.033)	(0.021)	(0.028)
Financial development	−0.0020**	0.0038	−0.0064	−0.0116**	−0.0070
	(0.001)	(0.006)	(0.010)	(0.006)	(0.006)
Exchange rate	0.0012***	0.0160*	0.0099**	−0.0026	0.0004
	(0.000)	(0.009)	(0.005)	(0.003)	(0.004)
GATS	0.0078*	-	-	0.0363	−0.0515**
	(0.004)	-	-	(0.029)	(0.026)
Initial export value	−0.0038***	−0.0143*	−0.0286***	−0.0113***	−0.0046
	(0.001)	(0.009)	(0.008)	(0.004)	(0.005)
Lagged duration	−0.0019***	−0.0137	−0.0084**	−0.0008	−0.0082***
	(0.000)	(0.010)	(0.004)	(0.004)	(0.003)
Total export value	−0.0079***	0.0843	−0.1259	−0.0071	−0.0145***
	(0.001)	(0.117)	(0.099)	(0.013)	(0.004)
Year dummies	Yes	No	No	No	No
Spell no. Dummies	Yes	Yes	Yes	No	Yes
Duration dummies	Yes	Yes	Yes	No	Yes
Observations	22,557	416	384	2,297	1,630
	(6)	(7)	(8)	(9)	(10)
	Financial	Government	Insurance	OBS	PCR
GDP Kenya	0.0273***	0.0776**	−0.0309	−0.0031	−0.0349***
	(0.010)	(0.031)	(0.025)	(0.008)	(0.013)
GDP importer	−0.0051*	−0.0001	−0.0037	0.0102	−0.0136**
	(0.003)	(0.003)	(0.005)	(0.007)	(0.006)
Distance	0.0059	0.0606**	0.0174	0.0846	0.0244
	(0.011)	(0.029)	(0.025)	(0.070)	(0.031)
	(6)	(7)	(8)	(9)	(10)
	Financial	Government	Insurance	OBS	PCR
Time Zone Differences	0.0019	−0.0091**	0.0023	−0.0118	0.0019
	(0.002)	(0.004)	(0.004)	(0.010)	(0.006)
Goods	−0.0018	−0.0000	−0.0047*	−0.0021	0.0008
	(0.002)	(0.002)	(0.003)	(0.002)	(0.003)
Common language	−0.0016	0.0134	0.0189	0.0200	−0.0082
	(0.010)	(0.012)	(0.018)	(0.020)	(0.026)
Colonial relationship	0.0162	0.0024	−0.0139	0.0375	0.0331
	(0.010)	(0.012)	(0.018)	(0.027)	(0.026)
Financial development	−0.0075*	0.0007	−0.0078	0.0004	−0.0132*
	(0.004)	(0.002)	(0.007)	(0.002)	(0.008)
Exchange rate	0.0036**	0.0016	0.0049*	0.0045	0.0064*
	(0.002)	(0.001)	(0.003)	(0.003)	(0.003)
GATS	0.0124	−0.0344*	0.0151	-	0.0261
	(0.012)	(0.021)	(0.027)	-	(0.031)
Initial export value	−0.0058***	−0.0047*	−0.0106***	−0.0039	−0.0119***
	(0.002)	(0.002)	(0.004)	(0.003)	(0.004)
Lagged duration	−0.0026	−0.0004	−0.0067**	-	−0.0019
	(0.002)	(0.004)	(0.003)	-	(0.003)
Total export value	0.0025	−0.0426	0.0525***	0.0049	0.0284**
	(0.007)	(0.031)	(0.019)	(0.005)	(0.012)
Year dummies	No	No	No	No	No
Spell no. Dummies	Yes	Yes	Yes	Yes	Yes
Duration dummies	Yes	Yes	Yes	No	No
Observations	1,945	1,069	1,510	2,541	2,287

Note: The table reports coefficients of the average marginal effects and the corresponding robust standard errors clustered at the importer-service level. *, **, and *** indicate statistical significance at the 10%, 5%, and 1% level, respectively. The dependent variable is a binary variable that equals one if an export spell is ended and zero otherwise. ICT means computer and information services.

Source: Author’s computation

Table 4. Probit regression marginal effects results by geographical regions

	(1)	(2)	(3)	(4)	(5)	(6)
	Africa	Asia	Europe	North America	Oceania	South America
GDP Kenya	−0.0091	−0.0229*	−0.0038	0.0125	−0.0313	0.0273
	(0.014)	(0.013)	(0.019)	(0.026)	(0.041)	(0.076)
GDP importer	−0.0055***	−0.0051**	−0.0058	−0.0111	0.0370	−0.0162
	(0.002)	(0.002)	(0.005)	(0.008)	(0.060)	(0.015)
Distance	−0.0061	0.0252	−0.0006	0.0046	8.5492	−1.0750
	(0.007)	(0.019)	(0.029)	(0.302)	(10.779)	(0.787)
Time Zone Differences	0.0083**	−0.0034	−0.0026	−0.0007	−0.5063	0.1120
	(0.004)	(0.004)	(0.008)	(0.031)	(0.660)	(0.087)
Goods	−0.0016	−0.0002	−0.0032*	−0.0033	−0.0057	0.0010
	(0.001)	(0.001)	(0.002)	(0.004)	(0.005)	(0.004)
Common language	0.0036	0.0115*	−0.0013	0.0433	−0.3781	−0.1657
	(0.006)	(0.006)	(0.023)	(0.064)	(0.378)	(0.144)
Colonial relationship	−0.0127**	0.0153**	0.0031	−0.0271	−0.8495	-
	(0.006)	(0.007)	(0.023)	(0.065)	(1.105)	-
Financial development	−0.0011	−0.0039**	0.0004	−0.0163	0.0031	−0.0194
	(0.002)	(0.002)	(0.003)	(0.011)	(0.021)	(0.016)
Exchange rate	−0.0009	0.0028**	0.0007	0.0076*	0.0444	0.0078
	(0.001)	(0.001)	(0.002)	(0.004)	(0.047)	(0.006)
GATS	0.0130**	−0.0006	0.0057	-	0.0686	-
	(0.006)	(0.012)	(0.010)	-	(0.372)	-
Initial export value	−0.0047***	−0.0001	−0.0058***	−0.0251***	−0.0147**	−0.0372
	(0.001)	(0.001)	(0.002)	(0.005)	(0.007)	(0.026)
Lagged duration	−0.0025***	−0.0000	−0.0019	−0.0042	−0.0037	0.0040
	(0.001)	(0.001)	(0.002)	(0.003)	(0.003)	(0.008)
Total export value	−0.0094***	−0.0091***	−0.0111***	−0.0179***	−0.0212***	−0.0369
	(0.001)	(0.002)	(0.002)	(0.004)	(0.007)	(0.024)
Year dummies	Yes	Yes	Yes	Yes	No
Spell no. Dummies	Yes	Yes	Yes	Yes	No
Duration dummies	Yes	Yes	Yes	Yes	No
Observations	6,599	3,935	3,264	1,274	812	691

Note: The table reports coefficients of the average marginal effects and the corresponding robust standard errors clustered at the importer-service level. *, **, and *** indicate statistical significance at the 10%, 5%, and 1% level, respectively. The dependent variable is a binary variable that equals one if an export spell is ended and zero otherwise.

Source: Author’s computation

Table 5. Probit regression marginal effects results for trade facilitation indicators

	(1)	(2)	(3)	(4)	(5)
Variables	Institutions	STRI	Mobile	Telephone	Internet
GATS	−0.0010	0.2836**	-	-	-
	(0.005)	(0.138)	-	-	-
Indicator	0.0005	0.0076	−0.0004**	−0.0004	−0.0015**
	(0.001)	(0.011)	(0.000)	(0.002)	(0.001)
Interaction (GATS*indicator)	−0.0048**	−0.0772**	0.0030	−0.0103	0.0051
	(0.002)	(0.037)	(0.007)	(0.017)	(0.007)
GDP Kenya	−0.0188**	0.0406**	−0.0546**	−0.0014	−0.0605***
	(0.008)	(0.016)	(0.024)	(0.014)	(0.019)
GDP importer	−0.0031***	−0.0039	−0.0027	0.0005	−0.0055
	(0.001)	(0.002)	(0.003)	(0.005)	(0.004)
Distance	0.0102***	0.0302	−0.0104	−0.0148	−0.0069
	(0.004)	(0.018)	(0.012)	(0.015)	(0.011)
Time Zone Differences	−0.0006	−0.0042*	0.0120	0.0128	0.0126
	(0.001)	(0.002)	(0.008)	(0.011)	(0.008)
Goods	−0.0010**	−0.0011	−0.0031	−0.0062*	−0.0012
	(0.000)	(0.001)	(0.003)	(0.004)	(0.002)
Common language	0.0036	−0.0000	−0.0122	0.0013	−0.0128
	(0.003)	(0.007)	(0.012)	(0.016)	(0.012)
Colonial relationship	0.0027	−0.0133	−0.0111	−0.0155	−0.0088
	(0.003)	(0.009)	(0.010)	(0.012)	(0.010)
Financial development	−0.0020**	−0.0057***	0.0014	0.0068	0.0028
	(0.001)	(0.002)	(0.004)	(0.006)	(0.004)
Exchange rate	0.0013***	0.0029***	0.0002	0.0013	0.0003
	(0.000)	(0.001)	(0.001)	(0.002)	(0.001)
Initial export value	−0.0038***	−0.0018	−0.0055**	−0.0048**	−0.0047**
	(0.001)	(0.001)	(0.002)	(0.002)	(0.002)
Lagged duration	−0.0018***	−0.0038***	0.0027	−0.0040**	0.0022
	(0.000)	(0.001)	(0.002)	(0.002)	(0.002)
Total export value	−0.0077***	−0.0091***	−0.0155***	−0.0115***	−0.0156***
	(0.001)	(0.002)	(0.003)	(0.002)	(0.003)
Year dummies	No	Yes	Yes	No	Yes
Spell no. Dummies	Yes	Yes	Yes	Yes	Yes
Duration dummies	Yes	Yes	No	Yes	No
Observations	22,557	6417	2548	1579	2571

Note: The table reports coefficients of the average marginal effects and the corresponding robust standard errors clustered at the importer-service level. *, **, and *** indicate statistical significance at the 10%, 5%, and 1% level, respectively. The dependent variable is a binary variable that equals one if an export spell is ended and zero otherwise.

Source: Author’s computation

Table A1. Variable definition, measurement and source

Variable	Definition	Description	Source
Dependent variable
$y_{\mathbf{i}\mathbf{m}}$	Likelihood of a spell ending	Dummy with 1 indicating ceasure of spell $i$ during the $m$ th time interval, 0 zero otherwise	OECD/WTO
Independent variables
$\mathbf{T}\mathbf{Z}\mathbf{D}$	Time Zone Differences	Difference in hours between Kenya’s capital (Nairobi) and partner’s capital	CEPII database
$\mathbf{D}$	Distance	Natural logarithm of the distance (kilometers) between Nairobi, Kenya’s capital city, and the capital of a partner country	CEPII database
$\mathbf{C}\mathbf{L}$	Common language	Dummy if a country has a common language with Kenya	CEPII database
$\mathbf{C}\mathbf{N}$	Colony	Dummy if a country has a colonial relationship with Kenya	CEPII database
$\mathbf{G}\mathbf{o}\mathbf{o}\mathbf{d}\mathbf{s}$	Goods	Natural logarithm of bilateral trade in goods between Kenya and trade partners (USD millions)	CEPII database
$\mathbf{G}\mathbf{A}\mathbf{T}\mathbf{S}$	GATS	Dummy if a country is a signatory of GATS	CEPII database
$\mathbf{G}\mathbf{D}\mathbf{P}\mathbf{K}$	GDP Kenya	Natural logarithm of GDP (current) (USD millions) for Kenya	WDI
$\mathbf{G}\mathbf{D}\mathbf{P}\mathbf{P}$	GDP partner	Natural logarithm of GDP (current) (USD millions) of a partner	WDI
$\mathbf{F}\mathbf{D}$	Financial development	Principal Component Analysis for Domestic credit to the private sector (% of GDP), Domestic credit provided by financial sector (% of GDP), Domestic credit to the private sector by banks (% of GDP), and Broad money (% of GDP)	WDI
$\mathbf{E}\mathbf{x}\mathbf{R}$	Exchange rate	Natural logarithm of the partner’s real exchange rate in USD	WDI
$\mathbf{I}\mathbf{E}\mathbf{V}$	Initial export value	Natural logarithm of the value of exports at the start of the spell	CEPII database
$\mathbf{L}\mathbf{D}$	Lagged duration	Number of years that the previous spell of the same export relationship lasted	CEPII database
$\mathbf{T}\mathbf{E}\mathbf{V}$	Total export value	Natural logarithm of the total value of exports per service in a year	CEPII database

Source: Author’s computation

Table A2. Leading destinations of service exports from Kenya, 1995 to 2019

Position	Total	Transport	Travel	Insurance	Finance	Communication	Construction	Government	Personal
1	USA	USA	UK	USA	USA	UK	UAE	USA	UK
2	UK	UK	USA	UK	UK	USA	Austria	UK	USA
3	Germany	Germany	Germany	UAE	Luxembourg	Ghana	Mauritius	Saudi Arabia	Spain
4	France	Japan	France	Italy	Japan	Netherlands	Nigeria	Egypt	France
5	Netherlands	Netherlands	Switzerland	Switzerland	France	Germany	Angola	France	Netherlands
6	Italy	France	Italy	Canada	Germany	Switzerland	UK	India	Austria
7	Switzerland	India	Netherlands	Japan	Bermuda	Ireland	Saudi Arabia	Netherlands	Japan
8	Japan	UAE	China	Netherlands	Ghana	Austria	Egypt	Germany	Italy
9	India	Italy	India	France	Netherlands	India	Belgium	Qatar	Germany
10	China	Switzerland	Saudi Arabia	Germany	Hong Kong	France	Ethiopia	UAE	Switzerland

Source: Author’s computation from OECD-WTO database

Table A3. Summary statistics

Variable	Obs.	Mean	Std. Dev.	Min	Max
Y (dependent variable)	33,974	0.023	0.151	0	1
GDP Kenya	33,974	17.178	0.733	16.018	18.375
GDP importer	33,398	17.226	2.335	10.961	23.787
Distance	33,974	8.642	0.650	6.227	9.664
Time Zone Differences	33,974	3.320	2.749	0	10
Goods	28,039	7.160	3.242	−5.809	13.564
Common language	33,974	0.309	0.462	0	1
Colonial relationship	33,974	0.277	0.447	0	1
Financial Development	33,974	0.074	1.731	−2.576	10.372
Exchange rate	29,371	3.050	2.772	−6.766	22.625
GATS	33,974	0.093	0.290	0	1
Initial export value	33,974	−4.371	3.258	−13.816	4.850
Lagged duration	33,974	0.496	2.007	0	23
Total export value	33,974	3.923	2.516	−8.286	7.690

Note: All variables provided as natural logarithms except dummies, lagged duration, Financial Development, and Time Zone Differences.

Source: Author’s computation