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Abstract

Trade openness is widely regarded as a key driver of economic growth, particularly in developing economies. It enables access to diverse goods and services, fosters technological diffusion, and enhances market efficiency. This research investigated how trade openness relates to key economic factors in the study area. The study adopted panel data from four countries in East Africa; namely Kenya, Tanzania, Uganda, and Rwanda from 2011 to 2020, retrieved from the World Bank's World Development Indicators. Prior to the main analysis, the data were subjected to a rigorous diagnostic test to ensure that the choice of the analytical model and the results were robust and reliable enough. Based on the pre-estimation diagnostic results, the fixed effect models were estimated to obtain the main findings of the study. The results disclose that gross capital formation (investment) and labor force expansion positively and significantly influence trade openness, with elasticities of 0.4 and 1.8, respectively. Conversely, the time required to start a business and enrollment in tertiary education demonstrate a negative impact on trade openness, with elasticities of -0.4 and -0.2, respectively. Population growth was found to be positively influencing trade openness, while life expectancy has a negative effect. These findings highlight the need for targeted policy interventions to enhance investment, streamline business processes, and align educational outcomes with trade sector needs to promote greater trade openness in the region.