Abstract

This paper analysed the determinants of Malawi’s cotton exports, given the challenges faced by main traditional export crop which has rekindled interest in the development of cotton as a key export crop. The gravity model of trade was estimated following the Helpman, Melitz and Rubinsten (2008) framework. Using a balanced panel data, with the set of 36 countries that Malawi has exported cotton to for 13 years (2001 to 2013), the model was estimated to find the determinants of the extensive and intensive margins of Malawi’s cotton exports. It was found that Malawi’s GDP per capita, price, exchange rate, production index, similarity in continent and eligibility for African Growth Opportunity Act (AGOA) significantly affected the extensive margin of Malawi’s cotton trade. It was also found that the per capita GDP, distance with trading partners and the exchange rate affected intensive margins of Malawi’s cotton exports.

Key words: Agricultural trade, gravity model, cotton, panel data, Malawi.