Factor Proportion Theory: Evidence from Kenya
Journal Title: Saudi Journal of Business and Management Studies - Year 2016, Vol 1, Issue 4
Abstract
Abstract: This paper examined empirically if Kenya’s pattern of trade with India is consistent with Heckscher-Ohlin theory, using a fixed-effect panel data model and macroeconomic variables for the period 1970 to 2013. The findings indicate a strong trade relation between Kenya and India, with Kenya specializing in the exportation of primary products to India. Overall, the findings indicate that the Kenya–India trade relation is consistent with the factor proportions theory, which spells out the trade relationship between the North – South poles. The paper recommends that Kenyan government should encourage Indian investors to establish subsidiaries of their manufacturing companies in Kenya in order to reduce the cost of importation of capital intensive goods and create jobs in the domestic economy. Keywords: Kenyan economy, Heckscher-Ohlin theory, Labour force.
Authors and Affiliations
Ugbor I. Kalu, Dominic U. Nwanosike, Jonathan E. Ogbuabor
Keywords
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