Evaluation and Comparison of Trade Relations Between Ethiopia–China and Ethiopia–India: Gravity Model

Abstract

This study evaluates the trade relations between Ethiopia and China as well as Ethiopia and India, and then compares the bilateral trade volume between them. It also examines the nexus between international trade and economic growth. Panel data were adopted to estimate the impact of China’s and India’s bilateral trade with Ethiopia for the 25 years duration (1990–2015). The gravity model has been employed in order to evaluate and compare the bilateral trade between Ethiopia–China and Ethiopia–India. To examine the collected data SPSS has been employed. The study also outlined three different hypotheses and examined them based on the consistency of the statistical empirical result of the study as well as the positive unconditional coherence with previous academic literature. The result demonstrates the bilateral trade between Ethiopia–China, 0.321, was found to be higher than Ethiopia–India, 0.136. The study’s empirical result also highlights that the influence of geographical proximity alone cannot be a determinant effect on bilateral trade, and discovers a significant linear relationship between a bilateral trade agreement (BTA) and a partner country’s economic size.