Determinants of Albanian Agricultural Export: The Gravity Model Approach

doi:10.7160/aol.2017.090201

Authors

DOI:

https://doi.org/10.7160/aol.2017.090201

How to Cite

Determinants of Albanian Agricultural Export: The Gravity Model Approach. (2017). AGRIS on-Line Papers in Economics and Informatics, 9(2), 3-21. https://doi.org/10.7160/aol.2017.090201

Abstract

Despite its huge agricultural potential, Albania has a sharp trade de cit with agricultural commodities. The main focus of this study is to analyse key determinants of its agricultural export. Here we employ baseline gravity model considering conventional gravity variables for Albanian export ows for the period 1996-2013. The Poisson Pseudo-Maximum Likelihood (PPML) regression is used for stepwise estimations of the augmented gravity model, including effects of Albanian Diaspora, exchange rate and price stability, trade liberalization and institutional distance. Main ndings suggest that agricultural export ow increases with increasing economic size, revealing higher impact of importer’s absorbing potential comparatively to Albania’s productive potential. On the other hand, growth in domestic demand, resulting from increase in population, leads to reduction of agricultural export. Moreover, agricultural export ows are determined by low transportation costs (distance), adjacency proximity (sharing common border) and linguistic similarities. Presence of Albanian Diaspora residing in the importing countries facilitates export ows. Results of this study reveal that exchange rate variability has a positive impact, while bilateral institutional distance has diminishing effects on Albanian agricultural exports.

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