Manufacturing Exports Drivers in Tanzania: The applicability of H-O Theorem

Abstract

This paper analyses the drivers of manufacturing exports in Tanzania to demonstrate the applicability of the Heckscher–Ohlin theorem through new trade theories in the manufacturing sector. The study hypothesises that: the labour force positively determines manufacturing exports; GDP has a positive impact on manufacturing exports; and manufacturing production has a positive impact on manufacturing exports. The paper employed the Autoregressive Distributed Lags (ARDL) approach. Lagged manufacturing exports, labour force and trade liberalisation were found to be significant drivers of manufacturing exports. The findings support the H-O theorem and its complements by new trade theories for the Tanzanian manufacturing sector. The paper bridges the gap by applying the combination of what the theorem advocates, its complementation by Kravis, Samuelson, Romalis, and the new trade theory insights in the Tanzanian context, and introduces a new conceptualisation of the international trade function. It recommends further initiatives to encourage exports from the manufacturing sector.