Saudi Journal of Business and Management Studies (SJBMS)
Volume-1 | Issue-04 | 162-168
Original Research Article
Factor Proportion Theory: Evidence from Kenya
Ugbor I. Kalu, Dominic U. Nwanosike, Jonathan E. Ogbuabor
Published : Nov. 30, 2016
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.